International marketing

in Strategy


What are the benefits  of  the  going  international? and  what are the different entry strategies in international marketing?

Ans. There  are  a  variety  of  ways  in  which  organizations  can  enter  foreign

markets. The three main ways are by direct or indirect export or production in a

foreign country.

Exporting :–

Exporting is the most traditional and well established form of operating in foreign markets. Exporting can be defined as the marketing of goods produced in one country into another. Whils no direct manufacturing is required in an overseas  country,  significant  investments  in  marketing  are  required.  The tendency  may  be  not  to  obtain  as  much  detailed  marketing  information  as compared  to  manufacturing  in  marketing  country;  however,  this  does  not negate the need for a detailed marketing strategy.

The advantages of exporting are :–

Ø Manufacturing is home based thus, it is less risky than overseas based

Ø Gives  an  opportunity  to  “learn”  overseas  markets  before  investing  in bricks and mortar

Ø Reduces the potential risks of operating overseas.


The disadvantage  is  mainly  that  one can  be  at  the “mercy”  of  overseas agents and so the lack of control has to be weighed against the advantages. For example,  in  the  exporting  of  African  horticultural  products,  the  agents  and Dutch flower auctions are in a position to dictate to producers.


Foreign production  :–

Besides  exporting,  other  market  entry  strategies  include  licensing,  joint ventures, , ownership and participation in export processing zones or free trade zones.

Licensing :– Licensing is defined as “the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor”.

It is quite similar to the “franchise” operation. Coca Cola is an excellent example of licensing. In Zimbabwe, United Bottlers have the licence to make Coke.

Licensing involves little expense and involvement. The only cost is signing the agreement and policing its implementation.

 Licensing gives the following advantages :–

Ø Good  way  to  start  in  foreign  operations  and  open  the  door  to  low  risk manufacturing relationships.

Ø Linkage of parent and receiving partner interests means both get most out of marketing effort

Ø Capital not tied up in foreign operation and

ØOptions to buy into partner exist or provision to take royalties in stock.

The disadvantages are :–

Ø Limited form  of participation - to length of agreement, specific product, process or trademark

Ø Potential returns from marketing and manufacturing may be lost

Ø Partner develops know-how and so licence is short

Ø Licensees  become  competitors  -  overcome  by  having  cross  technology transfer deals and

Ø Re quires  considerable  fact  finding,  planning,  investigation  and interpretation.


Those  who  decide  to  license  ought  to  keep  the  options  open  for  extending market  participation.  This  can  be  done  through  joint  ventures  with  the licensee.


Joint ventures :–

Joint  ventures  can  be  defined  as  “an  enterprise  in  which  two  or  more investors share ownership and control over property rights and operation”. Joint  ventures  are  a  more  extensive  form  of  participation  than  either exporting  or  licensing.  In  Zimbabwe,  Olivine  industries  has  a  joint  venture agreement with HJ Heinz in food processing.


Joint ventures give the following advantages :–

Ø Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process

Ø Joint financial strength

Ø May be only means of entry and

Ø May be the source of supply for a third country.


They also have disadvantages :–

Ø Partners do not have full control of management

Ø May be impossible to recover capital if need be

Ø Disagreement on third party markets to serve and

Ø Partners may have different views on expected benefits.


If the partners carefully map out in advance what they expect to achieve and how, then many problems can be overcome.


Ownership :– The most extensive form of participation is 100% ownership and this involves the greatest commitment in capital and managerial effort. The ability  to  communicate  and  control  100%  may  outweigh  any  of  the disadvantages of joint ventures and licensing. However, as mentioned earlier, repatriation of  earnings and capital has to be carefully monitored. The more unstable the environment the less likely is the ownership pathway an option.

Export processing zones (EPZ)

Whilst not  strictly speaking an  entry-strategy, EPZs serve as an  “entry” into  a  market.  They  are  primarily  an  investment  incentive  for  would  be investors  but  can  also  provide  employment  for  the  host  country  and  the transfer of skills as well as provide a base for the flow of goods in and out of the country.

Organizations  are  faced  with  a  number  of  strategy  alternatives  when deciding to enter foreign markets. Each one has to be carefully weighed in order to  make  the  most  appropriate  choice.  Every  approach  requires  careful attention to marketing, risk, matters of control and management..

Having done all the preparatory planning work (no mean task in itself!), the prospective global marketer has then to decide on a market entry strategy and a marketing mix. These are two main ways of foreign market entry either by entering from a home market base, via direct or indirect exporting, or by foreign based  production.  Within  these  two  possibilities,  marketers  can  adopt  an “aggressive” or “passive” export path.


Entry from the home base (direct) includes the use of agents, distributors, Government  and  overseas  subsidiaries  and  (indirect)  includes  the  use  of trading companies, export management companies, piggybacking or counter trade. Entry  from a foreign base  includes  licensing,  joint  ventures,  contract manufacture, ownership and export processing zones. Various strategies used in international marketing To  develop  an  effective  global  marketing  strategy,  companies  need  to divide it into four parts.  They are product, promotion, price and place.


1. Product  Strategies  :–  The  product  is  one  of  the  most  important components of a marketing program. A company is usually known by the products it offers  in the market. In the  global market  place, companies need to develop products which meet global standards.  However, product features  and  characteristics  can  be  customized  depending  on  the requirements of a  local  market. Once  the  brand  value  of a  product  is developed,  the  same  kind  of  positioning  and  marketing  efforts  can  be

utilized through  out  the global market. Product process design  should also take into consideration the legal restrictions of local markets.  For eg. Himalaya Drug company entered the US market in  1996 with products modified to suit local requirements. It sold various products in the US market  such  as  a  daily  health  and  digestive  capsules,  laxative  syrup, antiseptic cream etc.


2. Promotion Strategies :– The promotion strategies of a global marketing organization  include  advertising,  sales,  promotion,  publicity,  public relations,  direct  marketing  and  personal  selling.  As  the  cultures  of different countries differ significantly, it is always a challenging task for companies  to  design  an  effective  promotional  strategy  for  global customers.  Communication  is  an  essential  form  of  the  promotional

process. Another factor that also affects the designing of a promotional strategy is the different set of cost constraints in different countries. For eg. Media cost and sales force cost differ significantly from one country to another. Therefore companies need to be very careful in the selection of communication  mix  in  different  countries.  Different  promotional strategies  should  be  developed  for  different  markets.  One  of  the

promotional strategies should be developed for different markets.  One of the  important  promotional  strategies  for  industrial  markets  is participation  in  international  trade  fairs.  Sponsoring  locally  popular games and events can also be effective promotion strategies.

3. Pricing  Strategies  :–  While  developing  pricing strategies  for  the  global market, one must consider the internal  and external environments of a company. It is very difficult to asses the impact of these factors on the price of  a  product  because  these  factors  work  in  various  combinations  in various countries. A company needs to decide whether to adopt a common pricing strategy for the entire global market or to adopt a pricing strategy that suits individual nations. It is normally suggested that it is better to

adopt  individual  pricing  strategies  for  different  markets  in  which  the company  is  operating. Global  companies  need  to continuously  review their pricing strategies because uncontrollable factors such as exchange rates and inflation change continuously.


4. Place  Strategies  :– Economic, efficient  and reliable transportation  and distribution  of  goods  and  services  has  played  a  significant  role  in  the development of world  trade.  In  the total cost  of a  product,  over 50%  is related to material and  around  10%  is labour cost. Distribution  of the product accounted for the remaining 40%. Therefor e, the selection of an appropriate  distribution medium  is critical to  the  success of  the  global marketing  efforts  of  a  company  place  or  distribution  strategies  are dependent on the type of product a company offers.  Generally a company  has  access  to  two  major  types  of  distribution  channels  –  domestic intermediaries and foreign intermediaries. Apart from these channels, the company  can  also  use  its  own  personnel  for  distribution.  A  global distribution  strategy  has  to  be  developed  considering  the  economic, cultural, legal and political environment. The distribution strategies must be consistent with the product, pricing and promotional strategies. For

eg. McDonalds recently opened its outlet in Delhi Agra highway to cater to the increasing tourist traffic on the highway.


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This article was published on 2012/03/07