1 term in international marketing
Terms in International Marketing – Explained Simply
International marketing involves promoting and selling products or services across
different countries. Since markets, cultures, and business environments vary globally,
certain terms are commonly used to describe different marketing strategies and
approaches. Here are some key terms in international marketing explained in simple
words:
1. Domestic Marketing
Definition: Marketing activities that take place within a single country.
Example: A company in India sells its products only within India.
2. Foreign Marketing
Definition: When a company markets and sells its products in another country but adapts
very little to the new market.
Example: An Indian company selling its products in the USA but using the same advertising
strategy as in India.
3. Comparative Marketing
Definition: A study that compares different marketing strategies used in two or more
countries to find similarities and differences.
Example: A company compares the marketing trends in China and the USA to decide where
to launch a new product.
4. International Trade
Definition: The exchange of goods and services across national borders, considering
factors like trade policies and tariffs.
Example: A company in Japan exporting cars to Europe.
5. International Business
Definition: All types of business transactions (sales, investments, partnerships) happening
between companies and governments in different countries.
Example: Apple sources raw materials from Africa, manufactures in China, and sells in
Europe and the USA.
6. International Marketing
Definition: The process of planning and executing marketing strategies across multiple
countries while adapting to different cultures and consumer preferences.
Example: McDonald’s changes its menu in different countries to match local tastes (e.g.,
McAloo Tikki in India).
7. Global Marketing
Definition: A marketing strategy where a company treats the entire world as one big market
and tries to standardize its marketing approach as much as possible.
Example: Coca-Cola uses similar branding and advertising worldwide but may adjust
flavors slightly based on regional preferences.
# domestic environmental challenges
Domestic Environmental Challenges
Even if a company is selling products only in its own country, it still faces challenges due to
factors like the economy, laws, and infrastructure. These challenges also affect companies
that want to expand their business internationally.
1. Economic Environment
The economy of a country influences how businesses sell their products globally.
Tariffs & Taxes: Import duties and tariffs impact the cost of goods. If a country has high
import taxes, products become expensive, making them less competitive.
Foreign Exchange Rates: The value of a country’s currency affects the cost of importing and
exporting goods. If a currency loses value, importing materials becomes expensive.
Retail Challenges: In developed countries, products are sold in large supermarkets, but in
developing countries, smaller retail shops make distribution harder.
2. Technology
Technology availability differs between rich and developing countries.
Countries like India and China use this gap as an advantage, offering products at lower
prices to other developing nations.
Example: Bajaj Auto dominates the three-wheeler market because of cost-effective
production.
# reason to entering international markets
Reasons for Entering International Markets (Simplified Explanation)
Businesses expand to international markets for various reasons. Here’s a simple
breakdown:
1. Growth
When companies find that their local market is full (saturated), they look for new
opportunities abroad to sell their products and grow.
2. Profitability
Foreign markets may offer higher profit margins due to lower production costs, higher
selling prices, or government incentives.
3. Achieving Economies of Scale
Producing in large quantities reduces costs per unit. International expansion allows
companies to sell more products, reducing production expenses.
4. Risk Spread
Businesses reduce risks by selling in multiple markets. If one country faces economic
issues, they can still earn from other markets.
5. Access to Imported Inputs
Some countries provide benefits like tax exemptions on importing raw materials, making
production cheaper for businesses.
6. Uniqueness of Product or Service
If a product is unique, it has less competition in foreign markets, increasing demand.
Example: Indian handicrafts or herbal medicines are popular globally.
7. Marketing Opportunities Due to Life Cycles
Different countries have different product life cycles. If a product becomes old in one
country, it might still be new in another. Businesses take advantage of this to extend their
product’s market life.
8. Spreading R&D Costs
Research and Development (R&D) is expensive. By selling in multiple countries, companies
recover their R&D costs faster. Example: Pharmaceutical companies sell medicines
worldwide to cover high research expenses.
# evolutionary process of global marketing
Stages of Global Marketing Evolution
There are five stages of how a company grows from selling only locally to becoming a global
brand:
1. Domestic Marketing:
The company sells only in its home country.
All marketing decisions are based on domestic customers’ needs.
The company does not focus on foreign markets.
2. Export Marketing:
The company starts selling its products in other countries by exporting them.
Exports can be direct (company sells directly to customers) or indirect (using agents or
distributors).
The company still makes most decisions based on its home country market.
3. International Marketing:
The company gains a strong presence in foreign markets.
It competes with international brands and builds production facilities in other countries.
It focuses more on foreign customers and adapts products to their needs.
4. Multinational Marketing:
The company expands further and establishes operations in multiple regions.
It makes separate marketing strategies for different regions (called a “regiocentric
approach”).
The company benefits from cost savings by standardizing some operations across regions.
5. Global Marketing:
The company integrates its marketing strategies worldwide (called a “geocentric
approach”).
It reduces inefficiencies by coordinating global operations.
The company builds a global brand by sharing ideas, production, and strategies across
countries.
# factor affecting the selection of entry mode
External factors
1. Market Size
A country with a large market size (many consumers) is more attractive for investment.
Bigger markets justify higher investments like setting up a factory or a fully-owned
subsidiary.
Example: Indian company Ranbaxy entered China because of its large market potential.
2. Market Growth
If a market is growing fast, it has more future potential. Developed markets like the U.S. and
Europe are saturated (not much new demand), but emerging markets like India and China
have higher growth rates.
Example: Companies prefer investing in India, China, and other emerging markets because
their demand is still increasing.
3. Government Regulations
Every country has different rules for foreign businesses. Some require local partnerships,
while others impose high import duties or trade restrictions.
Example: The UAE requires foreign firms to have a local partner.
Example: Japanese car companies manufacture in the EU to avoid high import tariffs.
4. Level of Competition
If a market has strong local competitors, a company must carefully choose how to enter to
compete effectively.
Example: Car companies set up local manufacturing in India to compete better with
existing brands.
5. Physical Infrastructure
Good roads, communication, and banking systems make doing business easier.
Companies invest more in markets with strong infrastructure.
Example: Singapore, Dubai, and Hong Kong attract companies due to their advanced
infrastructure.
6. Level of Risk
There are different types of risks that affect market entry decisions:
Political Risk: If a country is politically unstable, businesses hesitate to invest.
Example: Countries like the U.S., UK, and Japan have stable political systems, while Brazil
and Pakistan have frequent instability.
Economic Risk: Exchange rate fluctuations and inflation can increase costs and reduce
profits.
Example: Countries with unstable currencies (e.g., Argentina) are riskier.
Operational Risk: If a company’s business model doesn’t match the foreign market’s
system, it faces difficulties.
Example: The lack of an organized retail sector in some countries affects how products are
sold.
7. Production and Shipping Costs
Lower manufacturing costs in some countries encourage foreign companies to set up
factories there. High shipping costs also influence decisions.
Example: Many multinational companies set up production in India and China because
labor costs are lower.
# Internal Factors Affecting Entry Mode Selection (Simplified Explanation)
When a company wants to expand into international markets, it must decide how to
enter – whether through exporting, franchising, partnerships, or setting up its own
business in the new country. This decision depends on several internal factors, which
come from within the company itself. These factors are:
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1. Company Objectives
Different companies have different goals when entering foreign markets.
Some just want to increase sales by selling abroad with minimal effort, while others
want to establish a strong presence and dominate the market.
If a company has long-term goals, it may set up a manufacturing plant or subsidiary in
the foreign country.
If the goal is short-term, the company may prefer exporting or forming partnerships to
reduce risk and investment.
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2. Availability of Company Resources
Expanding into another country requires money, skilled workers, and management
efforts.
Big companies with strong finances can invest in large-scale operations like wholly
owned subsidiaries or manufacturing plants.
Smaller companies with fewer resources may choose cheaper entry modes like
exporting, licensing, or franchising instead of direct investment.
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3. Level of Commitment
International expansion is a long-term effort that requires dedication.
Companies need to decide how much risk they are willing to take.
If a company is confident and has enough resources, it may choose wholly owned
subsidiaries or joint ventures.
If the company is unsure or wants to test the market first, it may prefer exporting,
licensing, or franchising.
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4. International Experience
Companies with past experience in international markets are more confident and take
bigger risks.
They may choose wholly owned subsidiaries or joint ventures since they already
understand foreign markets.
New companies with little or no international experience prefer exporting, licensing,
or franchising, which are low-risk methods.
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5. Flexibility
The business environment is constantly changing. A market that looks profitable today
may become risky in the future due to political changes, new competitors, or
customer preferences.
Companies must stay flexible in their entry strategy and be ready to change plans if
needed.
For example, a company may start with exporting and later set up local production if
demand increases.
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Example: ICICI Bank’s Entry Strategy
ICICI Bank expanded internationally using different entry modes depending on each
country’s regulations.
It set up subsidiaries in London and Toronto with heavy investment.
It opened offshore branches in Singapore and Bahrain and representative offices in
Dubai, Shanghai, and Hong Kong.
This strategy shows how companies adapt to local regulations and use different
methods to enter foreign markets.
