Question

(TCO 3) What is one of the external factors (outside of the company) that companies must address when developing international marketing strategies?

(TCO 2) How does a marketer determine what are considered acceptable marketing practices of a foreign region?

Answer 1

(TCO 3)

INTRODUCTION TO INTERNATIONAL MARKETING

Jet travel opened up the world to many people, and the expansion of the World Wide Web took that one step further. Borders seem to be more symbolic now than they are barriers to trade like they were years ago. As this whole new frontier opened up, businesses realized there was a brand new opportunity out there for them to generate even more income. All this has led to the birth and growth of international marketing.

What Is International Marketing?

In simple terms, international marketing means making decisions for your marketing mixbased on potential markets outside of your company’s home market. Some would call it the coordination of marketing strategies by a company that are necessary to sell goods or services in a foreign marketplace.

Why Do Businesses Need International Marketing?

A very good reason why companies need to consider international marketing is to get a piece of the over 10 trillion dollars of goods and services that are traded across borders each year. For the company that markets itself properly on an international level, this can lead to a huge boost in revenue.

Not only do businesses have a great opportunity to grow their revenue if they market themselves internationally, but they will also run into a lot of obstacles that are not typically encountered in domestic marketing.

FACTORS TO CONSIDER FOR INTERNATIONAL MARKETING

International marketing is very different from domestic marketing. There are a whole host of issues when marketing internationally that a business does not normally have to deal with when marketing in their own country. The following are some key things to consider when making any international marketing decision.

Cultural Factors

A. Language

Language, more specifically translation, needs to be paid very close attention to when doing international marketing. There have been some embarrassing mistakes in international advertising that most likely did not help companies sell their product. A great example is when Coca-Cola was first translated into Chinese it meant “bite the wax tadpole” or “female horse stuffed with wax” depending on which Chinese dialect it was translated into. No one at General Motors realized the translation for the name of their car, the “Nova”, meant “it won’t go” in South America. Gerber used the same packaging with the cute little baby on it they had used in America for packaging its baby food in Africa; they did not realize that with the high illiteracy rate in Africa that it was common for food packaging to display a picture of the contents inside.

These types of language problems are funny to an outsider but can spell financial disaster for your international business if you are not careful.

B. Taste

Entering international markets can be very difficult for some companies because of some countries’ eating habits. McDonald’s had to totally make over its image when it came to marketing itself in a country like India that sees beef consumption as being ‘off limits’; they ended up being successful there by introducing vegetarian and regional choices to the menu selection. Many international fast food chains such as Kentucky Fried Chicken, Wendy’s and McDonalds had to start offering menu selections with rice dishes in order to break into the Asian market.

C. Regional Values

Many times a country to which you would like to sell a product has extreme regional differences that must be accounted for when marketing. A perfect example of this is Canada; they have large French speaking populations around Montreal and Quebec that are culturally much different than the English speaking communities found throughout the rest of the country.

D. Consumer Habits

Culture and personality combine to shape consumer behavior in every particular region of the world or country. When you want to market a product to a foreign country you need to first determine whether it is an individualistic society (free-thinking culture) or a collective society (the peer group has the most influence on buying decisions). You also have to consider other societal and psychological factors that influence buying decisions in the country you are targeting to sell your goods or services to.

E. Age/Demographics

Age and other demographics play a key role in international marketing just as they do in domestic marketing; companies have to pay very close attention to them. Your company is probably not going to want to market laptops to senior citizens in a third world country where there is very little internet and where a large percentage of the citizens over 60 are computer illiterate. This illustrates the importance of understanding age and other demographics on a potential country that you might sell your goods or services to since they are both reliable and used in making marketing decisions.

Economic Factors

A. Per Capita Income

Of course a country’s wealth is a huge factor when determining potential target market countries and how to market your product to those countries. For instance, Eritreans have a per capita income of less than $800 a year; it is probably not going to be a good market to sell your $1000 side-by-side washers and dryers.

Then again you don’t always need an overwhelming number of people in a certain income bracket in a foreign market if your product is considered high end. Say your company sells luxury automobiles that are in the $60,000 – $80,000 range, maybe less than 1% of the people in a country such as Estonia can afford a car in that price range, but if that group numbers 10,000 people and you think you can get 5000 to buy your product, that country is still relevant as far as potential sales go.

B. Relevant Class Structure

When you are marketing your product or service internationally you must also take into consideration class structure because it varies widely from country to country. Most countries have an upper, middle and lower class, but the numbers of people in these classes can be significantly different from country to country. An example of this are countries like the USA that have a very large proportion of their citizens located in what is termed ‘middle class’, as opposed to the Philippines where there is a very small middle class because the country consists mainly of a small percentage of upper-class individuals and many poor people.

C. Supply and Demand

Of course supply and demand will play a major role in trying to market your products anywhere in the world. These days a company has to take a deeper look at potential markets than ever before because just about anything will sell if you market it the right way and in the right place. Imagine how surprised the makers of Bali’s Civet Cat Coffee (Kopi Luwak – made from the animal’s poop) were when they took their product internationally and it soon grew so popular it became the world’s most expensive cup of coffee.

D. Financial Transactions and Banking

Considering how you will get paid for the products and services you market and sell internationally is important too. In the more prosperous countries it is taken for granted that you can buy goods internationally and pay for them with such things as credit cards, debit cards, online payment processors and cash transfer businesses, but that is clearly not the case everywhere in the world. These types of financial realities will greatly impact your marketing strategy.

Political and Legal Factors

A. Laws

There are laws in some countries that will greatly affect your ability to do business in them or prohibit it altogether. One such example is Thailand which has specific laws stating no foreign person or company can own more than 49% of a business in Thailand, so you must be willing to take on a Thai partner in order to do business there. You must be aware of laws like this if part of your product marketing strategy includes manufacturing or distributing your wares in a foreign target market country.

B. Licensing and Permits

There is a chance that the only way you can do business in a foreign country is to give out an expensive permit or license of another business in that country to manufacture and sell your product for you. Governments do these things as a way of making sure a larger percentage of income from sales stays in the home country. An example of this is Pepsi’s license to Heineken to bottle and sell Pepsi products in the Netherlands.

C. Taxes

Taxes are another way that governments can cash in on foreign businesses operating and selling products in their country, so their citizens’ spending does not allow much money to leave the country. Taxes can and do impact your ability to make a profit selling goods and services in a foreign country and will shape your international marketing strategy because of that. High tax rates on goods sold, like those in the USA, can make it hard for a business to stay on the right side of that fine line between profit and loss.

D. Fees

When you market your products for sale in a foreign country, you may be subject to pay certain fees for the right to do that. These fees can be a one-time deal or recurring, and they can also be quite high in some circumstances if they involve what might be considered luxury items.

E. Tariffs

Tariffs have long been used to balance trade between countries and to protect national companies from losing business to foreign competitors. This can be a big factor when it comes to international trade and marketing your company’s products or services for sale. An example of this is China’s 105.4% tariff on chicken that is shipped from the USA; it is easy to see how a high tariff like this can push a country’s citizens toward buying domestically raised chicken.

F. Currency risks

There are always risks when doing business in the currency of a foreign country that you are marketing your product or services to. If you have your money tied up in a foreign currency and economic events fall just right, your company could stand to lose millions. From September 24, 2012 – October 2, 2012 Iran’s Rial dropped almost 60% from 24,600 for one US$ to 39,000 for one US$; these types of currency events can and do happen.

G. Other Political Risks and Restrictions:

• Investment restrictions: Many countries have strict requirements on who can own businesses and do other business-related investments in their country. Your marketing department needs to be aware of these things. For instance in Malaysia, if you are an agricultural business and you want to buy land to produce fruits and vegetables to sell there, any land purchase over $163,000 is subject to approval by the government and may come with other restrictions too.
• Operational restrictions: Just how much operational control you will have over your overseas business remains to be seen, and that is a concern for some. Because of some of the restrictions that have been discussed and other requirements for doing business in a foreign country, chances are your business will need an international management team. This will affect the operational control of your business and has to be factored into any marketing decisions that your company makes.
• Discriminatory restrictions: Discriminatory practices in a foreign country may inhibit or prohibit marketing your goods and services to that country too. In many Middle Eastern countries women are not allowed to wear makeup, so if your business is cosmetic sales, then that would be a big marketing factor. There are other types of discrimination that impact marketing decisions too, such as price discrimination. If a country makes the goods in their own country cheaper to buy than similar imported goods (such as through tariffs and quotas), chances are you may have a hard time selling your goods in that country.
• Quotas: Quotas work a lot like tariffs when it comes to restricting foreign business profits in another country. Quotas are also designed to encourage domestic business within a country or state. An example of this is Indonesia, which only allows 60,000 tons of red onions to be imported into the country every 6 months. This quota ensures Indonesian farmers they will have a place to sell their onions and encourages them to continue growing them. Your business and your international marketing team must be aware of any quotas a particular country may have in place when you are deciding where to market your goods and services internationally.

H. Stability

These days the stability of a country has to be considered very strongly before you market your product in a foreign country.

• Wars: Wars can have a very large impact on your business in a foreign country. There were many businesses and business customer bases that became extinct almost overnight when war broke out in Libya.
• Political Unrest: Political instability in a foreign country can affect your ability to market a product or service to a foreign country too. If you were to invest in marketing products or services in a country such as Egypt now, you would run the risk of losing your customer base if a war breaks out because of the current political instability in the country.

Intangibles

A. Environmental

Environmental factors will play a role in international marketing and they can have both a positive and negative effect on your international marketing strategy. If you manufacture a product that does not hold up well when constantly subjected to periods of high heat, you might want to consider that carefully before marketing your heat sensitive product internationally to such places as Saudi Arabia.

You must also be aware of places that are regularly affected by such natural disasters as typhoons and earthquakes. When these types of events happen, they can wipe out your entire customer base in a country or halt their purchasing power for extended periods of time, drastically impacting your business.

B. Regional Partnerships

Sometimes companies know it will be difficult to break into a foreign market without the help of other companies that know the nuances of marketing a product to the people there well. This is why so many companies choose to partner with other companies that are based out of the country whose market they are trying to get into. An example of this is when McDonalds went into the Indian market, they did it with partners that knew the local business practices and customs; these companies were Hardcastle Restaurants Private Ltd which had a strong influence in western India, and Connaught Plaza Restaurants Private Ltd which were popular in the northern India.

C. Product Adaptation

While a “one size fits all” marketing strategy may work in a fairly homogenous country like the US, this same type of strategy would most likely be a huge failure in countries like those in the Middle East that are separated by cultural, historical and religious divides. Any prudent international marketing strategy needs to take things like this into account.

(TCO 2)

Ethical marketing doesn’t refer to a plan in and of itself, but offers tools for companies to evaluate the marketing strategies they use in the past, present, and future. If a company decides that an ethical marketing strategy can increase their profits or advance their public image, they can take steps to revise their existing marketing. In some cases this involves minor changes; in others it will require entirely new ad campaigns.

Any ethical marketing effort will begin with a careful analysis of the company, its customers, and the markets it operate within. Ethical marketing has many advantages, but few companies would undertake an ethical marketing strategy if it reduces profits. Careful research is the best way to predict the effects of a change in strategy. If ethical marketing proves to be cost prohibitive, many companies will abandon the effort.

A company will then decide which features of their advertising to perform in ethical ways. As previously mentioned, the field of ethics is notoriously abstract. What is right to one may be wrong to another. Marketing professionals must reach an agreement about how they want to deliver their campaigns. They might decide to focus on making honest claims, avoiding marketing to children, or falsely criticizing competitors. A delicate balance has to be struck between the truth of the ad and its ability to persuade the customer.

Finally, ethical marketers need to make difficult choices about how to leverage the capitol of their ethical decisions. For most companies, the simple knowledge that they are doing the right thing will not be enough of a motivating factor. Ethical marketing often highlights the ethical choices a company has made in order to improve their public reputation. This can be a powerful way to connect with customers, but it also runs the risk of seeming self congratulatory. Any effort at ethical marketing has to balance a company’s self interest with their social responsibility.

One company which embodies the spirit of ethical marketing is The Body Shop, a worldwide chain of bath and body stores. Since their inception they have been committed to treating workers fairly, avoiding animal testing, using organic products, and promoting healthy body images. These values are often at the center of their marketing efforts. The ethical nature of the company is highlighted as a way to differentiate themselves from their competitors in the cosmetics industry.