International Marketing

Large companies like Coca-Cola and Nestle operate in numerous countries globally. Starting as a drink sold for 5 cents in a pharmacy in Atlanta¹, Coca-Cola now operates in over 200 countries worldwide. So how did Coca-Cola become a global success? Beyond the refreshing soft drink and famously recognized logo, the company also places significant emphasis on its international marketing strategy. Read on to learn more about the marketing process of entering new markets.

International Marketing International Marketing

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Table of contents

    International Marketing Definition

    International marketing plays a significant role in many companies' marketing strategies. To understand the definition of international marketing, let's first look at what a global firm is.

    A global firm is an organization that operates in more than one country to gain competitive advantages that are not available domestically.

    The advantages that global firms may benefit from include marketing, financial, or production advantages. To attain these advantages, firms must make several international marketing decisions. The decision-making process is as follows:

    1. Conduct research to examine the global marketing environment

    2. Decide whether to expand internationally

    3. Decide which markets to enter

    4. Decide how to enter the chosen market(s)

    5. Create an international marketing plan

    6. Decide on organizational factors

    International Marketing Concepts

    Before entering a new market, firms must research potential threats and opportunities. Let's now look at international marketing concepts essential for all firms to consider before expanding globally.

    International Trade

    When analyzing the marketing environment, it is essential to examine international trade restrictions. International firms may face trade barriers when importing/exporting. For example, a country may impose tariffs (a type of tax) on certain products to increase domestic revenues and discourage the trade of a particular product.

    On the other hand, quotas are another trade barrier, limiting the number of imports into a country or region. For example, The European Union might impose a quota on certain foreign agricultural products to encourage domestic agriculture.

    Similarly, exchange controls are imposed to limit foreign exchange and the fluctuation of exchange rates.

    That said, certain organizational bodies and treaties are in place to encourage trade between countries. For example, the World Trade Organization (WTO) was established to promote global trade, whilst certain countries and regions (e.g. European Union) have signed free trade agreements to reduce trade barriers.

    International marketing International trade barriers StudySmarterFigure 1. International Trade Barriers - StudySmarter

    Economic Environment

    Similarly, it is essential to examine the economic environment when expanding internationally. Income distribution is often observed, indicating whether a market is attractive for a certain product type. One of the other methods used includes examining a country's industrial structure, which indicates the market's needs:

    • Subsistence economies - economies that engage in simple agriculture and individuals consume the output they produce.

    • Industrial economies - economies that import and export many products/services.

    • Emerging economies - economies that are experiencing high economic growth and trade expansion.

    Political and Legal Environment

    Finally, the political and legal environment may also significantly impact international marketing expansion. A firm should consider:

    • Political stability,

    • Employment law,

    • Potential legislative changes,

    • Attitude to international trade,

    • Government policy,

    • Bureaucracy,

    • Monetary factors, etc.

    International Marketing Strategy

    Once a company has established which market to enter, it needs to develop an international marketing strategy. This includes determining how it will enter the market. The three main methods are exporting, creating a joint venture, and direct investment (see Figure 1 below).

    International marketing New market entry methods StudySmarterFigure 2. Market Entry Methods - StudySmarter

    Exporting

    Exporting includes selling products directly to foreign markets. Companies produce the products in their home country and may trade them in foreign marketplaces without any modifications to the product. There are two types of exporting:

    1. Indirect exporting - involves selling products through an intermediary

    2. Direct exporting - involves selling the products directly to the customer in a foreign market

    Joint Ventures

    Joint venturing includes partnering with another company in a foreign market to produce and sell products. There are four types of joint ventures:

    1. Licensing: entering a foreign market through selling the manufacturing, product, trademark, etc., rights to a licensee in the foreign market.

    2. Contract manufacturing: entering a foreign market by contracting with local manufacturers to produce a good or service.

    3. Management contracting: entering a foreign market by supplying management services to a local firm.

    4. Joint ownership: entering a foreign market by partnering with a local company through investment; both parties share ownership and control.

    Direct Investment

    The final market entry method is direct investment.

    Direct investment includes entering a new market by setting up facilities in the foreign market.

    This method is often pursued by companies who have earned significant profit from exporting their products to a specific foreign market. If demand for their product is high and the market is large enough, it might be advantageous to set up a manufacturing facility in the foreign market. Additionally, it may lead to lower costs and new job opportunities.

    International Marketing Examples

    International firms should decide whether to adapt their marketing strategies to cater to local tastes or keep their strategy as it is. There are two distinct strategies companies can undertake:

    1. A standardized marketing strategy uses the same marketing strategy in all markets.

    2. An adapted marketing strategy uses a different marketing strategy for each market segment.

    For example, the company IKEA uses a standardization strategy, whereby all products are marketed similarly in all markets. IKEA also sells almost the same collection of products (similar product lines) in every country it operates globally. This leads to IKEA saving costs on marketing - as all products are standardized - and results in economies of scale.

    Now, let's consider a company that uses an adapted marketing strategy.

    On the other hand, Netflix uses an adapted marketing strategy, whereby its product is adapted to fit the needs of each target market. The selection of films and series are slightly different depending on the country in which the consumer is watching Netflix. The company also considers language preferences (e.g. the availability of German subtitles for Netflix films in Germany). Netflix does this to cater to local preferences. The streaming service's pricing is also adapted to local market conditions. For example, a standard Netflix subscription in the UK is £10.99; in Egypt, it is EGP 165 (around £7.20).²

    Challenges of International Marketing

    However, international marketing comes with its own set of challenges. For example, when it comes to culture, each country has its own set of values and norms. As a result, if a product is successful in one country, it does not guarantee its success in another. Due to cultural differences, consumers in different countries may react differently to specific products and advertisements, and cultural blunders are likely to arise. Similarly, translation errors can often cause lead to unfavorable outcomes.

    Coors, a beer manufacturer from the US, launched its 'Turn It Loose' campaign in Spain, hoping it would convince Spanish consumers to buy the product. However, when translated into Spanish, the campaign's name was far off from what the American company tried to convey. As it turned out, the campaign's tagline translated into a Spanish expression interpreted as "suffer from diarrhea" .³ This caught the Spanish market's attention for all the wrong reasons.

    Another challenge for companies lies in deciding whether even to go global. As global competition is rising, due to many companies engaging in international trade, home markets may present fewer opportunities than abroad. However, certain businesses, such as local businesses adapted to specific local needs, may not have to venture overseas to remain successful. On the other hand, companies that operate in global industries might be forced to expand internationally to stay competitive; or risk losing to multinational companies from abroad. As a result, global competition may pose a significant challenge to those that delay international expansion.

    International Marketing - Key takeaways

    • A global firm is an organization that operates in more than one country to benefit from competitive advantages that are not available domestically.
    • International firms may face trade barriers when importing/exporting. Trade barriers include:
      • Tariffs,
      • Quotas,
      • Exchange controls.
    • There are three main types of international marketing strategy:
      • Exporting includes selling products directly to foreign markets. The two types of exporting are direct and indirect exporting.
      • Joint venturing includes partnering with another company in a foreign market to produce and sell products. Joint venture types include: licensing, contract manufacturing, management contracting, and joint ownership.
      • Direct investment includes entering a new market by setting up facilities in the foreign market.
    • Companies can undertake two distinct international global marketing strategies: standardization and adaptation.
    • Cultural differences, global competition, and the decision to expand internationally are vital challenges marketers face when making international marketing decisions.

    References

    1. The Coca-Cola Company. The Birth of a Refreshing Idea. 2022
    2. Netflix. Plans and Pricing. 2022.
    3. Skye Schooley. Lost in Translation: 13 International Marketing Fails. 2022.
    Frequently Asked Questions about International Marketing

    What is international marketing? 

    International marketing plays a significant role in many companies' marketing strategies. Many global firms use international marketing. A global firm is an organisation that operates in more than one country to gain competitive advantages that are not available domestically.

    What is the role of international marketing? 

    Organisations use international marketing to enter new markets and explore new opportunities. The advantages that global firms may benefit from engaging in international markets include marketing, financial, or production advantages. To attain these advantages, firms must make several international marketing decisions. 

    What are the four basic marketing strategies? 

    The four basic marketing strategies are often referred to as the marketing mix. The marketing mix is made up of the 4Ps including product, price, place, and promotion. 

    What are the key concepts of international marketing? 

    The key concepts of international marketing include making decisions on how a firm should enter new markets. Some of the key methods for entering new markets include exporting, joint ventures, and direct investment. 

    What is the importance of international marketing?

    The importance of international marketing for most firms includes the advantages they may gain from entering global markets. The advantages that global firms may benefit from include marketing, financial, or production advantages. To attain these advantages, firms must make several international marketing decisions. 

    Test your knowledge with multiple choice flashcards

    Some examples of the advantages global firms may benefit from include marketing, financial, or production advantages. 

    International firms may face _______ when importing/exporting.

    One of the methods used to evaluate the economic environment includes examining the country's trade structure, which indicates the market’s needs.

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    Team International Marketing Teachers

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