Module 8. International marketing

Lesson 27

INTERNATIONAL MARKETING ENVIRONMENT

27.1 Introduction

Today most business activities have a global scope. Technologies, capital investment, research, production, marketing, distribution, communication networks etc all have global dimensions. Every business must be prepared to compete in an increasingly interdependent global economic and physical environment and all business houses must be aware of the effects of these trends when managing a domestic company.

27.2 International Marketing Environment

The important elements of international marketing environment are depicted in fig. 1.1

Source: International marketing by cateora Graham, Tata McGraw – hill Edition (2005)

Fig. 27.1 Elements of International Marketing Environment

Even though many of the trade barriers are not appropriate, but they still play important role in international marketing. Although World Trade Organization (WTO) has tried to reduce many of these barriers, they do exist. Since an international marketer has no control over these wide ranging factors, it is better to understand and adopt them wisely.

The political environment of different nations varies widely. From political view point, it may be democratic or dictatorship, monarchy etc. from economic view point; it may be communalism, socialism and capitalism. For an international marketer, political environment is complex and difficult as a result of interaction of domestic, foreign and international politics. If the host and home country are adopting different ideology/system, their conflicting politics may become hindrance in smooth conduct of business. Due to diversity in political and economic systems, varying philosophies are adopted by governments of nations across the world. At times the political motives over shadow their economic logic. This leads to creation of expropriation, nationalization and restrictions against exports or imports. Decisions in international marketing are depended upon political considerations also. Firm has to adopt policies conducive to host countries, political ideology also prepare contingency plans for adverse eventualities. It is necessary for home country to adopt suitable policies like employing citizens of host country, sharing business ownership with local firms, and be civic oriented. At the same time, to protect their company’s economic interest, should remain politically neutral, quietly lobby for their mission. Thus, political environment for international marketing is considered as an obstacle by some companies, where as others view it as a challenge.

Just like political environment, legal environment is also complex and dynamic, as different countries claim over business operations. New obstacles and opportunities are created due to interaction between domestic, foreign and international legal environment. At times the circumstances so arise that a multinational company is pressurized by two different government governments in opposing directions.

There also exist cultural differences among nations which are very critical for international marketers. Culture prescribes beliefs, traditions, customs and values which are socially shared. Culture is subjective, cumulative, enduring yet dynamic. Although some cultural traits are common, many others are unique and vary across the nations, cultural differences even exist within a country also. It is necessary for international marketer, not to misinterpret the other country’s culture. As marketing occurs within a given culture, a firm marketing plan takes on meaning or it is appropriate only when it is relevant to that culture. An international marketing firm will succeed if it tries to walk in the other person’s shoes in order to understand more clearly that persons concern and ideas.

27.3 Impact of International Marketing Environment Factors

27.3.1 Aspects of domestic environment

A political decision involving domestic foreign policy can have both positive and negative effect on organizations international marketing success. For example imposing and lifting of ban on export of skim milk powder by Indian government have positive and negative effects on cooperative dairy plants and consequently affecting milk producers. The domestic economic climate is an important home based unaccountable factor which has a far reaching effect on organizations competitive position in international market. The investment capacity of the organization in plants and facilities either in foreign or domestic markets, is influenced greatly by domestic economic vitality. If internal economic conditions worsen then restriction might be imposed on investment and purchasing in foreign markets so as to strengthen the domestic economy. Competition within the home country also necessitates the international marketer to alter their activities. For example once upon a time Bajaj Company enjoyed a very good position in two and three wheel automobile segment in India. It could depend on achieving profit goals that provided capital to invest in foreign markets. Without worrying about the company’s lucrative base, management has time and resources to devise aggressive international marketing programmes. However the competitive structure changed with entry of many other competitors like TVS Suzuki, Hero Honda, etc. As a result, Bajaj had to direct energy and resources back to India.

27.3.2 Aspects of foreign environment

Along with uncontrollable domestic environment factors, a significant source of uncertainty is imposed by foreign uncontrollable environmental factors. An organization having business transactions in foreign countries might find differences in political stability, class structure and economic climate. The important factors in the uncontrollable international environment include: political/ legal forces, economic forces, competitive forces, level of technology, and structure of distribution, cultural forces, geography and infrastructure. Vast differences exist with regard to level of technology between developed, developing and under developed countries. In underdeveloped countries, technical expertise might not be available at appropriate level for product support. In general, population also may not posse’s adequate technical knowledge for proper maintenance of equipment. This necessitates providing special training to local people or the company has to provide such support.

A business organization faces political and legal issues while operating both at home and in foreign country. While operating in a foreign country, these factors have more profound effect due to alien status of the company. The dimensions of alien status for a home country include (i) foreigners controls the business (ii) The culture of the host country is alien to management.

The alien status of business implies that when viewed as an outsider, it can be considered as an exploiter and thus may receive unfair or prejudiced treatment by the government authorities. For example Indian Government gave coca- cola, the choice of either reveling its secret formula or leave the country. At that time coca-cola chose to leave. Several years later, it was welcomed again but it faced continued interference and harassment from various political activities inspired by local competitors.

The most challenging and important task confronting international marketers are the task of cultural adjustment. It is necessary to adjust marketing efforts by international marketer’s to culture of domestic country in which they want to do business. For example western culture uses white for bridal gowns, whereas white is a symbol of mourning in many Asian countries. Cross culture misunderstanding might also occur by a simple hand gesture which has different meaning across the world. For example to signify something is ok, people in USA raise a hand and make a circle with a thumb and forefinger. But the same gesture implies money to Japanese and zero to French. Eating habits very across the countries. In general, there are more vegetarians in India than non vegetarians. There are also very strict vegetarians. Eating habits of Jains is also different as they even do not take onions, garlic etc. in foods. Such a culture difference necessitated Macdonald’s to revise their food offering policy for India.

Conclusion: The internationalization of business is proceeding at a fast pace. The globalization of markets and competition demand that manager must pay attention to the global environment. The international marketing task is made more daunting because environmental factor such as laws, customs and culture vary from country to country. These environmental differences must be taken into account if the firm are to market products and services in other countries and earn profit.

References

Cateora, P. R. and Graham, J. L. (2005) Internal marketing, Tata McGraw Hill Publishing Company, New Delhi.