A growing number of corporations have crossed geographical boundaries and have become multinational in character. These firms are increasing their investments of private capital in overseas divisions, branches, and subsidiaries. These multinational companies all over the world have invested in foreign countries for the same basic reasons they invested capital in their own countries. These basic reasons are: increasing long-term growth and profit prospects, maximizing total sales revenue, and improving overall market position. Since some domestic markets approach saturation, companies look to foreign markets as outlets for surplus productive capacity and as potential sources of larger profit margins and returns on investments.
Basically, marketing abroad is the same as marketing at home. Regardless of which part of the world your company sells in, your marketing program must still be built around a sound product or service that is properly priced, promoted, and distributed to a target market that has been carefully analyzed. In other words, your marketing manager has the same controllable decision variables in both domestic and non-domestic markets. Although the development of a marketing program may be the same in either domestic or non-domestic markets, special problems may be involved in the implementation of marketing programs in non-domestic markets. These problems often arise because of the environmental differences that exist among various countries that marketing managers may be unfamiliar with.
Below are more reasons to go international:
1. To escape from recessions in the domestic market.
2. To counter adverse demographic changes.
3. To export technology to less developed nations.
4. To increase their political influence.
5. To keep up with or escape competition.
6. To enjoy economies of scale in production.
7. To extend a product’s life cycle.
8. To dispose of inventories.
9. To enjoy tax advantages.
10. To create research opportunities by testing products in foreign markets.
11. To establish a progressive image.
How to enter a foreign market
i. You can use a distributor or agent.
ii. You can acquire or partner with a business in the foreign country.
iii. You can start by selling through online marketplaces.
iv. You can offer direct e-commerce sales.
v. You can start by selling indirectly through another company that exports to the target market.
Risks and challenges involved in taking your business into the global market
When compared with the tasks it faces at home, a company attempting to establish an international marketing organization faces a much higher degree of risk and uncertainty. In a foreign market, management is often less familiar with the cultural situation, political situation, economic situation, the institutional structure of the distribution network, potential competitors, and the reliability of media and market data.
Furthermore, a company seeking to go international faces some problems, which include:
Cultural misunderstandings: The differences in the cultural environment of foreign countries may sometimes be misunderstood or not even recognized because of the tendency for marketing managers to use their own cultural values as a frame of reference. This tendency to rely on one’s own cultural values has been the major cause of many international marketing problems.
Political uncertainty: Governments are unstable in many countries, and social unrest and even armed conflict must sometimes be reckoned with.
Import restrictions: Tariffs, import quotas, and other types of import restrictions hinder international business. These are usually established to promote national self-sufficiency and can be a huge roadblock for the multinational firm.
Exchange controls: Often a nation will establish limits on the amount of earned and invested funds that can be withdrawn from their nation. These exchange controls are established by nations that are experiencing balance-of-payment problems. However, these and other types of currency regulations are important considerations in the decision to expand into a foreign market.
Ownership and personal restrictions: In many nations, governments have a requirement that the majority ownership of a company operating in their nation must be held by nationals of their country. Other nations require that the majority of the personnel of a foreign firm be local citizens. Each of these restrictions can act as an obstacle to foreign expansion.
Using product planning and pricing to successfully enter the international market
Before a firm can market a product, there must be something to sell, a product or a service. From this standpoint, product planning is the starting point for an entire marketing program. Once this is accomplished, management can then determine whether there is an adequate market for the product and can decide how the product should be marketed. Most businesses would not think of entering a domestic market without extensive product planning. Unfortunately, this is often not the case with foreign markets.
Often, some firms enter foreign markets with the same product sold in their own countries or one with only minor changes. In many cases, these firms have encountered serious problems, and an example of such a problem occurred when some American manufacturers began to export refrigerators to Europe. The companies exported essentially the same models sold in the United States, but the refrigerators were the wrong size, shape, and had the wrong temperature range for some areas, along with weak appeal. Therefore, they were unaccepted in the market. Whereas the adaptation of the product to local conditions may have eliminated this failure, this adaptation is easier said than done. For instance, even in the domestic market, over-proliferation of product varieties and options can dilute economies of scale.
The dilution results in higher production costs, which may make the price of serving each market segment with an adapted product prohibitive. In some cases, changes can be made rather inexpensively, while in others, the sales potential of the particular market may not warrant extensive product changes. In any case, your management must examine these problems carefully to avoid foreign marketing failures.
Handling pricing for international marketing
In the domestic market, pricing is a complex task. The basic approaches used in price determination in foreign markets are the same as those used in your domestic market, but the pricing task is often more complicated in foreign markets because of additional problems with tariffs, taxes, and currency conversion. Import duties are probably the major constraint for foreign marketers and are encountered in many markets. Your management must decide whether import duties will be paid by your firm, by the foreign consumer, or shared by both of you. These and similar constraints may force a company to abandon a desirable pricing strategy or may force them to abandon the market altogether.
Another pricing problem arises because of the rigidity in price structures found in many foreign markets. Many foreign middlemen are not aggressive in their pricing policies; they often prefer to maintain high unit margins over volume rather than develop large volume by means of lower prices and smaller margins per unit. Many times this rigidity is encouraged by legislation that prevents retailers from cutting prices substantially at their own discretion. These are only a few of the pricing problems encountered by international marketers. Overall, the marketer must be aware of the above constraints prior to entry into foreign markets.
