Modes of Entry into International Markets (Place)

Modes of Entry into International Markets (Place)

How does an organization enter an overseas market?

Background

Modes of entry into an international market are the channels which your organization employs to gain entry to a new international market. This lesson considers a number of key alternatives, but recognizes that alternatives are many and diverse. Here you will be considering modes of entry into international markets such as the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries. Finally we consider the Stages of Internationalization.

Licensing

Licensing includes franchising, Turnkey contracts and contract manufacturing.

  • Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise.
  • Franchising involves the organization (franchiser) providing branding, concepts, expertise, and in fact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Dominos Pizza, Coffee Republic and McDonald’s Restaurants.
  • Turnkey contracts are major strategies to build large plants. They often include the training and development of key employees where skills are sparse – for example, Toyota’s car plant in Adapazari, Turkey. You would not own the plant once it is handed over.

International Agents and International Distributors

Agents are often an early step into international marketing. Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. They rarely take ownership of products, and more commonly take a commission on goods sold. Agents usually represent more than one organization. Agents are a low-cost, but low-control option. If you intend to globalize, make sure that your contract allows you to regain direct control of product. Of course you need to set targets since you never know the level of commitment of your agent. Agents might also represent your competitors – so beware conflicts of interest. They tend to be expensive to recruit, retain and train. Distributors are similar to agents, with the main difference that distributors take ownership of the goods. Therefore they have an incentive to market products and to make a profit from them. Otherwise pros and cons are similar to those of international agents.

Strategic Alliances (SA)

Strategic alliances is a term that describes a whole series of different relationships between companies that market internationally. Sometimes the relationships are between competitors. There are many examples including:

  • Shared manufacturing e.g. Toyota Ayago is also marketed as a Citroen and a Peugeot.
  • Research and Development (R&D) arrangements.
  • Distribution alliances e.g. iPhone was initially marketed by O2 in the United Kingdom.
  • Marketing agreements.

Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.

Joint Ventures (JV) and modes of entry

Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business. There are many reasons why companies set up Joint Ventures to assist them to enter a new international market:

  • Access to technology, core competences or management skills. For example, Honda’s relationship with Rover in the 1980’s.
  • To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners.
  • Access to distribution channels, manufacturing and R&D are most common forms of Joint Venture.

Overseas Manufacture or International Sales Subsidiary

A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market. This is also known as Foreign Direct Investment (FDI). This can be a new-build, or the company might acquire a current business that has suitable plant etc. Of course you could assemble products in the new plant, and simply export components from the home market (or another country). The key benefit is that your business becomes localized – you manufacture for customers in the market in which you are trading. You also will gain local market knowledge and be able to adapt products and services to the needs of local consumers. The downside is that you take on the risk associated with the local domestic market. An International Sales Subsidiary would be similar, reducing the element of risk, and have the same key benefit of course. However, it acts more like a distributor that is owned by your own company.

Internationalization Stages, and modes of entry

So having considered the key modes of entry into international markets, we conclude by considering the Stages of Internationalization. Some companies will never trade overseas and so do not go through a single stage. Others will start at a later or even final stage. Of course some will go through each stage as summarized now:

  • Indirect exporting or licensing
  • Direct exporting via a local distributor
  • Your own foreign presences
  • Home manufacture, and foreign assembly
  • Foreign manufacture

It is worth noting that not all authorities on international marketing agree as to which mode of entry sits where. For example, some see franchising as a stand alone mode, whilst others see franchising as part of licensing. In reality, the most important point is that you consider all useful modes of entry into international markets – over and above which pigeon-hole it fits into. If in doubt, always clarify your tutor’s preferred view.

The Internet

The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The eMarketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies that now employ eMarketing approaches as part of their overall marketing plan. For some companies the Internet is an additional channel that enhances or replaces their traditional channel(s). For others the Internet has provided the opportunity for a new online company. More

Exporting

There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward. Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over and above indirect exporting. On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country – which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly. Examples of indirect exporting include:

  • Piggybacking whereby your new product uses the existing distribution and logistics of another business.
  • Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of bespoke or a la carte services to exporting organizations.
  • Consortia are groups of small or medium-sized organizations that group together to market related, or sometimes unrelated products in international markets.
  • Trading companies were started when some nations decided that they wished to have overseas colonies. They date back to an imperialist past that some nations might prefer to forget e.g. the British, French, Spanish and Portuguese colonies. Today they exist as mainstream businesses that use traditional business relationships as part of their competitive advantage.

What is International Marketing?

What is International Marketing?

Introduction to International Marketing

International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. For the purposes of this lesson on international marketing and those that follow it, international marketing and global marketing are interchangeable.

Note: Keegan’s definition is typical of those that see international marketing a one stage of an internationalisation process.

What is Global Marketing?

“Global marketing refers to marketing activities coordinated and integrated across multiple country markets.”

Johansson (2000)

Note: Jonny K. Johansson defines global marketing as a bigger brother to international marketing i.e. more of an extension.

". . . The result is a global approach to international marketing. Rather than focusing on country markets, that is, the differences due to the physical location of customers groups, managers concentrate on product markets, that is, groups of customers seeking shared benefits or to be served with the same technology, emphasizing their similarities regardless of geographic areas in which they are located. “

Muhlbacher, Helmuth, and Dahringer (2006)

Note: Muhlbacher et al delineate international marketing (adapted) and global marketing (standardised).

"Global/transnational marketing focuses upon leveraging a company’s assets, experience and products globally and upon adapting to what is truly unique and different in each country. “

Keegan (2002)

Note: Keegan takes a strategic, corporate overview to define the transnational nature of global marketing.

So, as with many other elements of marketing, there is no single definition of international marketing, and there could be some confusion about where international marketing begins and global marketing ends. These lessons will assume that both terms are interchangeable, and will define international marketing as follows:

International marketing is simply the application of marketing principles to more than one country.

Bibliography

Doole, I. and Lowe, R. (2001), International Marketing Strategy – Analysis, Development and Implementation, Thomson Learning, 3rd Ed.

Johansson, J.K. (2000), Global Marketing – Foreign Entry, Local Marketing, and Global Management, Johansson, International Edition.

Cateora, P.R., and Ghauri, P.N. (1999), International Marketing, McGraw-Hill Publishing Company, European Edition.

Muhlbacher, H., Helmuth, L. and Dahringer, L. (2006), International Marketing – A Global Perspective, Thomson, 3rd Ed.

Keegan, W.J., (2002), Global Marketing Management, Prentice Hall, 7th Ed.

The intersection is the result of the process of internationalisation. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix is simply adapted in some way to take into account differences in consumers and segments. It then follows that global marketing takes a more standardised approach to world markets and focuses upon sameness, in other words the similarities in consumers and segments. So let’s take a look at some generally accepted definitions.

What is International Marketing?

"At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe.”

Doole and Lowe (2001).

Note: Doole and Lowe differentiate between international marketing (simple mix changes) and global marketing (more complex and extensive).

"International Marketing is the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit. “

Cateora and Ghauri (1999)

Note: Cateora and Ghauri consider international marketing in the absence of global marketing.

"International marketing is the application of marketing orientation and marketing capabilities to international business. “

Muhlbacher, Helmuth, and Dahringer (2006)

Note: Muhlbacher et al consider international marketing in relation to marketing orientation and competences (see also Global Marketing).

"The international market goes beyond the export marketer and becomes more involved in the marketing environment in the countries in which it is doing business. “

Keegan (2002)

International Marketing Communications (Promotion)

International Marketing Communications (Promotion)

Media Choices for International Marketing

Marketing communications in international markets needs to be conducted with care. This lesson will consider some of the key issues that you need to take into account when promoting products or services in overseas markets. There will be influences upon your media choice, cultural issues to be considered, as well as the media choices themselves – personal selling, advertising, and others.

Other factors that need to be considered in relation to international marketing communications (Promotion) include:

  • The work ethic of employees and customers to be targeted by media.
  • Levels of literacy and the availability of education for the national population.
  • The similarity or diversity of beliefs, religion, morality and values in the target nation.
  • The similarity or diversity of beliefs, religion, morality and values in the target nation.
  • The family and the roles of those within it are factors to take into account.

Media Choices in International Marketing.

Personal Selling in International Marketing.

Personal selling has a number of pros and cons:

  • It is beneficial where wages tend to be low, since staffing costs will be comparatively low.
  • Where there are many languages, you’ll need trained sales personnel that can convey your message in specific tongues (see culture above).
  • The sales force will need to be supported. Commercial administration staff will have to take care of sales enquiries, send out product literature and samples, and make quotations – often online.
  • You’ll need to invest time and effort in recruiting, motivating, organizing and training a local sales force. Recruits will need to know about products and markets, language and culture, the location of target segments, customer buyer behaviour – and that’s just the beginning.
  • There is a dilemma as to whether to place expatriate employees into your international target market, or to recruit locally. Local is best!
  • Where business etiquette varies from culture to culture, you’ll need to train your people in what to expect – or recruit salesmen from the local market.

Advertising in International Marketing.

Advertising has a number of pros and cons:

  • When considering press advertising try to anticipate the levels of literacy within the nation in question. Where literacy levels are lower, perhaps you could use a more visual campaign.
  • Which language(s) is the press written in?
  • What is the split between regional and national press in your target market?
  • What types of television channels are available? Are they HDD, digital, analogue, satellite, cable, via the telephone, via a broadband or ADSL connection?
  • Which TV channels do our target segments watch?
  • Is there space on the suitable TV channels when we want it, or at a price that we can afford?
  • Where visual communication is paramount, are there suitable poster locations?
  • What is the behaviour of the target population in relation to cinema? For example, Cinema is tremendously popular in India.
  • Radio has similar issues as TV and press. Which stations do your target groups listen to – news, sports or music? Is there space available with the most suitable stations?

Other Media Choices in International Marketing.

Other potential media would include:

  • Web-based marketing using your own domestic site, or one developed specifically for the target market. Chinese websites are very different to Western sites. They are very busy and every single space is filled with images and text. Affiliate or pay-per-click advertising may be available.
  • International tradeshows, trade missions, sponsorship (for example international sporting events), Public Relations (for example oil companies) and a variety of other international marketing communications are available to the international marketer.
  • So, to finish, this lesson aimed to summarize the key options and issues that face the international marketer when dealing with marketing communications and media choices in international markets. Of course it is by no means conclusive.

Influences upon International Media Choice.

There are a number of factors that will impact upon choice and availability of media such as:

  • The nature and level of competition for marcoms channels in your target market.
  • Whether or not there is a rich variety of media in your target market.
  • The level of economic development in your target market (for example, in remote regions of Africa there would be no mains electricity on which to run TVs or radios).
  • The availability of other local resources to assist you with your campaign will also need to be investigated (for example, sales people or local advertising expertise).
  • Local laws may not allow specific content or references to be made in adverts (for example, it is not acceptable to show naked legs in adverts displayed in Muslim countries).
  • And of course a lot depends upon the purpose of the international campaign in the first place. What are your international marketing communications objectives?

Cultural Issues and International Marketing Communications.

There are a whole range of cultural issues that international marketers need to consider when communicating with target audiences in different cultures.

Language will always be a challenge. One cannot use a single language for an international campaign. For example, there are between six and twelve main regional variations of the Chinese languages, with the most popular being Mandarin (c 850 Million), followed by Wu (c. 90 million), Min (c. 70 million) and Cantonese (c. 70 million). India has 22 languages including Assamese, Bengali, Bodo, Dogri, Gujarati, Hindi, Punjabi, and Tamil to name but a few. Of course language choice could affect branding choices , and the names of products and services. Hidden messages and humour would be especially tricky to convey. Famous examples include the Vauxhall Corsa, which was called the Nova in the United Kingdom – of course No Va! Would not be an acceptable name in Spanish. A similar problem was left unaddressed by Toyota, with their MR2 in France (think about it!).

Design, symbolism and aesthetics sometimes do not transcend international boundaries. For example Japanese aesthetics sometimes focus upon taste and beauty. Also look at Japanese cars from the front – they have a smiling face.

The manner in which people present themselves in terms of dress and appearance changes from culture to culture. For example in Maori culture, dress plays a central role with everyday clothing differing greatly from ceremonial costume. Whereas in Western business-culture the standard ‘uniform’ tends to be a conservative collar and tie.

Products and International Marketing

Products and International Marketing

Standardization versus Adaptation

As you will see from this website, product is a focal element of the marketing mix. When considering the nature of products and services in international marketing, the same models apply such as:

Another problem with standardization is that it depends largely upon economies of scale. With global businesses, your business will manufacture in a number of nations. However, some countries implement trade barriers (and yes – this includes the USA and the European Union). If this is the case, then localization and the resultant adaptation is inevitable.

What exactly do you intend to standardize? Is your whole product ‘experience’ to be standardized? Do you standardize customer service and product support, marketing communications, pricing, and channels of distribution? Then you have a standardized marketing mix – surely this cannot benefit your business.

However, international product decision-making often centres around the standardization versus adaptation debate. Essentially, do we market the same, standard product in an international market or segment, or do we localize it, and adapted it so that it pleases local tastes? Here are some of the advantages and disadvantage of standardization.

Advantages of Standardization.

International uniformity has its own advantages. As people travel the World, they can be assured that wherever they go the product that they buy from you will be same and that it will have the same, standard benefits. This could mean the components that they buy from you in different local markets as they themselves become global.

Standardization reinforces positive consumer perceptions of your product. One of the payoffs of great quality for a single product category is that the reputation of your product will help you sell more of it. Positive word-of-mouth pays dividends for brand owners.

Cost reduction will give economies of scale. Since you are making large quantities or the same, non-adapted product – you benefit from the advantages associated with manufacturing in bulk. For example, components can be bought in large quantities, which reduces the cost-per-unit. There are other benefits relating to economies of scale, including improved research and development, marketing operational costs, lower costs of investment, and in an age where trade barriers are coming down – standardization is a plausible product strategy.

Quality is improved since efforts are concentrated upon the single product. Staff can be trained to enhance the quality of the product and manufacturers will invest in technology and equipment that can safeguard the quality of the standardized product offering.

Disadvantages of Standardization.

Since the product is the same wherever you buy it, it is wholly undifferentiated. It is not unique in anyway. This leaves the obvious opportunity for a competitor to design a tailor-made, differentiated or branded product that meets the needs of local segments. Of course products have different uses in different countries (for example cycling is a leisure activity in some nations, and a form of transport in others). Local markets have local needs and tastes. Therefore by standardizing, you could leave yourself vulnerable.

International Marketing Environment

International Marketing Environment

Environment analysis for international marketing

One of the fundamental steps that needs to be taken prior to beginning international marketing is the environmental analysis. Of course there are many tools on Marketing Teacher that would prove useful at this stage such as lessons on the marketing environment, PEST Analysis, SWOT Analysis, POWER SWOT and Five Forces Analysis. However, the very specific and unique nature of each individual nation needs to be looked into. Below we consider the nature of an international PEST Analysis, and the influence of tariff and non-tariff barriers.

Socio-cultural

  • Culture, religion and society are of huge importance.
  • What are the cultural norms for doing business? E.g. is there a form of barter?
  • Will cultural norms impact upon your ability to trade overseas? E.g. Putonghua is very difficult for many Western people to learn.

Technology

  • Do copyright, intellectual property laws or patents protect technology in other countries? E.g. China and Jordan do not always respect international patents.
  • Does your technology conform to local laws? E.g. electrical items that run on non-domestic currents could be dangerous.
  • Are technologies at different stages in the Product Life Cycle (PLC) in various countries? E.g. versions/releases of software.

Tariff and Non-Tariff Barriers.

There are a number of fences that companies need to plan for when initialising international marketing. Tariff and non-tariff barriers are still very common, even today.

Tariff barriers are charges imposed upon imports – so they are a form of import taxation. This could mean that your margins are reduced so much that trading overseas becomes too unprofitable. However they are normally transparent and you can plan to take them into account.

Non-tariff barriers are trickier to spot. Governments sometimes act in favour of their own domestic industries rather than allow competition from overseas. Bureaucracy is a hurdle often encountered by exporting companies – it takes many forms and includes unnecessary hold-ups and red tape. Quotas are another form of non-tariff barrier i.e. restricting the quantity of a product that can be imported into a particular country.

An International PEST Analysis.

PEST is a well-known and widely applied tool when considering the external nature of the domestic market. However, it is equally as useful when applied to the nature of the international marketing environment.

International PEST Analysis would consider:

  • How easy will it be to move from purely domestic to international marketing?
  • Would your business benefit from inward foreign investment?
  • What is the nature of competition within each individual market, and how will companies from other nations compete when you meet with them head-to-head in unfamiliar countries?
  • Many other factors that are specific to your organization or industry.

Political

  • Is there any historical relationship between countries that would benefit or hinder international marketing?
  • What is the influence of communities or unions for trading? E.g. The European Union and its authority over European laws and regulation.
  • What kind of international and domestic laws will your business encounter?
  • What is the nature of politics in the country that you are targeting, and what is their view on encouraging foreign competition from overseas?

Economic

  • What is the level of new industrial growth? E.g. China is experiencing terrific industrial growth.
  • What is the impact of currency fluctuations on exchange rates, and do your home market and your new international market – share a common currency? E.g. Polish companies trading in Eire will use Euros.
  • There are of course the usual economic indicators that one needs to be aware of such as inflation, Gross Domestic Product (GDP), levels of employment, national income, the predisposition of consumers to spend savings or to use credit, as well as many others.

The International Market Entry Evaluation Process

 

The International Market Entry Evaluation Process

How to Enter a Foreign Market

This lesson gives an outline of the way in which an organization should select which foreign to enter. The International Marketing Entry Evaluation Process is a five stage process, and its purpose is to gauge which international market or markets offer the best opportunities for our products or services to succeed. The five steps are Country Identification, Preliminary Screening, In-Depth Screening, Final Selection and Direct Experience. Let’s take a look at each step in turn.

Step One – Country Identification

The World is your oyster. You can choose any country to go into. So you conduct country identification – which means that you undertake a general overview of potential new markets. There might be a simple match – for example two countries might share a similar heritage e.g. the United Kingdom and Australia, a similar language e.g. the United States and Australia, or even a similar culture, political ideology or religion e.g. China and Cuba. Often selection at this stage is more straightforward. For example a country is nearby e.g. Canada and the United States. Alternatively your export market is in the same trading zone e.g. the European Union. Again at this point it is very early days and potential export markets could be included or discarded for any number of reasons.

International Market Entry Evaluation Process

Step Two – Preliminary Screening

At this second stage one takes a more serious look at those countries remaining after undergoing preliminary screening. Now you begin to score, weight and rank nations based upon macro-economic factors such as currency stability, exchange rates, level of domestic consumption and so on. Now you have the basis to start calculating the nature of market entry costs. Some countries such as China require that some fraction of the company entering the market is owned domestically – this would need to be taken into account. There are some nations that are experiencing political instability and any company entering such a market would need to be rewarded for the risk that they would take. At this point the marketing manager could decide upon a shorter list of countries that he or she would wish to enter. Now in-depth screening can begin.

Step Three – In-Depth Screening

The countries that make it to stage three would all be considered feasible for market entry. So it is vital that detailed information on the target market is obtained so that marketing decision-making can be accurate. Now one can deal with not only micro-economic factors but also local conditions such as marketing research in relation to the marketing mix i.e. what prices can be charged in the nation? – How does one distribute a product or service such as ours in the nation? How should we communicate with our target segments in the nation? How does our product or service need to be adapted for the nation? All of this  information will form the basis of segmentation, targeting and positioning. One could also take into account the value of the nation’s market, any tariffs or quotas in operation, and similar opportunities or threats to new entrants.

Step Four – Final Selection

Now a final short-list of potential nations is decided upon. Managers would reflect upon strategic goals and look for a match in the nations at hand. The company could look at close competitors or similar domestic companies that have already entered the market to get firmer costs in relation to market entry. Managers could also look at other nations that it has entered to see if there are any similarities, or learning that can be used to assist with decision-making in this instance. A final scoring, ranking and weighting can be undertaken based upon more focused criteria. After this exercise the marketing manager should probably try to visit the final handful of nations remaining on the short, short-list.

Step Five – Direct Experience

Personal experience is important. Marketing manager or their representatives should travel to a particular nation to experience first hand the nation’s culture and business practices. On a first impressions basis at least one can ascertain in what ways the nation is similar or dissimilar to your own domestic market or the others in which your company already trades. Now you will need to be careful in respect of self-referencing. Remember that your experience to date is based upon your life mainly in your own nation and your expectations will be based upon what your already know. Try to be flexible and experimental in new nations, and don’t be judgemental – it’s about what’s best for your company – happy hunting.

 

International Marketing and Price

International Marketing and Price

How should we set prices for international markets?

This lesson considers the basics of pricing for international marketing. As with all of the international marketing lessons, every country and culture within it will influence price. So here we are going to look at some of the common influences upon pricing decision-making, the impact of grey markets, international approaches to pricing, and more mainstream marketing approaches to pricing that can be applied to an international context.

Generic Marketing Approaches to Pricing.

  • Premium Pricing.
  • Penetration Pricing.
  • Economy Pricing.
  • Price Skimming.
  • Psychological Pricing.
  • Product Line Pricing.
  • Optional Product Pricing.
  • Captive Product Pricing
  • Product Bundle Pricing.
  • Promotional Pricing.
  • Geographical Pricing.
  • Value Pricing.
  • More…

Influences on pricing for international marketing.

  • The cost of manufacturing, distributing and marketing your product.
  • The physical location of production plants might influence price. For example, Toyota have plants in their European market, in the United Kingdom and Turkey.
  • Of course fluctuations in foreign currencies affect pricing. Many companies are benefiting from a relatively low US Dollar price during the 2010s. This make imports to the United States expensive, but exports relatively cheap to other nations. However fluctuations make it very difficult for companies to make long-term decisions – such as building large factories in global markets i.e. costs of production are cheap today, but could be expensive in the future, impacting upon the price that your business is forced to charge.
  • The price that the international consumer is willing to pay for your product.
  • Your own business objectives will influence price. For example, large international companies such as Starbucks may operate at a loss in some locations but still need a local presence in order to maintain their economies of scale, as well as their reputation as a global player.
  • The price that competitors in international markets are already charging.
  • Business environment factors such as government policy and taxation.

Grey Markets

A business can expect problems with grey markets where it trades across national boundaries. So if Company Y is English it will trade in Stirling or Pound notes. If it trades in the United States during the 2010s, to be competitive it will need to sell at a reduced price in the US. However, there is little to stop an entrepreneur from traveling to the US, filling up a transport container with products, which have been exported from Company Y in England, then returning them back to England and marketing the same product at a lower price than Company Y is willing to trade. This is an example of parallel trade, which is legal – just. Therefore it is known as grey marketing.

International Pricing Approaches

  • Export Pricing – a price is set for by the home-based marketing managers for the international market. The pricing approach is based upon a whole series of factors which are driven by the influences on pricing listed above. Then mainstream approaches to pricing may be implemented – see below.
  • Non-cash payments – less and less popular these days, non-cash payments include counter-trade where goods are exchanged for goods between companies from different parts of the World.
  • Transfer Pricing – prices are set in the home market, and goods are effectively sold to the international subsidiary which then attaches its own margin based upon the best price that local managers decide that they could achieve. Then mainstream approaches to pricing may be implemented – see below.
  • Standardization versus adaptation – do you use a standard, common approach to pricing in each market, or do you decide to adapt the price to local conditions?

International Marketing and Culture

International Marketing and Culture

What is the influence of culture on international marketing?

Culture is the way that we do things around here. Culture could relate to a country (national culture), a distinct section of the community (sub-culture), or an organization (corporate culture). It is widely accepted that you are not born with a culture, and that it is learned. So, culture includes all that we have learned in relation to values and norms, customs and traditions, beliefs and religions, rituals and artefacts (i.e. tangible symbols of a culture, such as the Sydney Opera House or the Great Wall of China).

Values and Attitudes

Values and attitudes vary between nations, and even vary within nations. So if you are planning to take a product or service overseas make sure that you have a good grasp the locality before you enter the market. This could mean altering promotional material or subtle branding messages. There may also be an issue when managing local employees. For example, in France workers tend to take vacations for the whole of August, whilst in the United States employees may only take a couple of week’s vacation in an entire year.

  • In 2004, China banned a Nike television commercial showing U.S. basketball star LeBron James in a battle with animated cartoon kung fu masters and two dragons, because it was argued that the ad insults Chinese national dignity.
  • In 2006, Tourism Australian launched its ad campaign entitled "So where the bloody hell are you?" in Britain. The $130 million (US) campaign was banned by the British Advertising Standards Authority from the United Kingdom. The campaign featured all the standard icons of Australia such as beaches, deserts, and coral reefs, as well as traditional symbols like the Opera House and the Sydney Harbour Bridge. The commentary ran:
    "We’ve poured you a beer and we’ve had the camels shampooed, we’ve saved you a spot on the beach. We’ve even got the sharks out of the pool,".
    Then, from a bikini-clad blonde, come the tag line:
    "So where the bloody hell are you?"

Education

The level and nature of education in each international market will vary. This may impact the type of message or even the medium that you employ. For example, in countries with low literacy levels, advertisers would avoid communications which depended upon written copy, and would favour radio advertising with an audio message or visual media such as billboards. The labelling of products may also be an issue.

  • In the People’s Republic of China a nationwide system of public education is in place, which includes primary schools, middle schools (lower and upper), and universities. Nine years of education is compulsory for all Chinese students.
  • In Finland school attendance is compulsory between the ages of 7 and 16, the first nine years of education (primary and secondary school) are compulsory, and the pupils go to their local school. The education after primary school is divided to the vocational and academic systems, according to the old German model.
  • In Uganda schooling includes 7 years of primary education, 6 years of secondary education (divided into 4 years of lower secondary and 2 years of upper secondary school), and 3 to 5 years of post-secondary education.

Social Organizations

This aspect of Terpstra and Sarathy’s Cultural Framework relates to how a national society is organized. For example, what is the role of women in a society? How is the country governed – centralized or devolved? The level influence of class or casts upon a society needs to be considered. For example, India has an established caste system – and many Western countries still have an embedded class system. So social mobility could be restricted where caste and class systems are in place. Whether or not there are strong trade unions will impact upon management decisions if you employ local workers.

Technology and Material Culture

Technology is a term that includes many other elements. It includes questions such as is there energy to power our products? Is there a transport infrastructure to distribute our goods to consumers? Does the local port have large enough cranes to offload containers from ships? How quickly does innovation diffuse? Also of key importance, do consumers actually buy material goods i.e. are they materialistic?

  • Trevor Baylis launched the clockwork radio upon the African market. Since batteries were expensive in Africa and power supplies in rural areas are non-existent. The clockwork radio innovation was a huge success.
  • China’s car market grew 25% in 2006 and it has overtaken Japan to be the second-largest car market in the world with sales of 8 million vehicles. With just six car owners per 100 people (6%), compared with 90% car ownership in the US and 80% in the UK, the potential for growth in the Chinese market is immense.

Law and Politics

As with many aspects of Terpstra and Sarathy’s Cultural Framework, the underpinning social culture will drive the political and legal landscape. The political ideology on which the society is based will impact upon your decision to market there. For example, the United Kingdom has a largely market-driven, democratic society with laws based upon precedent and legislation, whilst Iran has a political and legal system based upon the teachings and principles Islam and a Sharia tradition.

Aesthetics

Aesthetics relate to your senses, and the appreciation of the artistic nature of something, including its smell, taste or ambience. For example, is something beautiful? Does it have a fashionable design? Was an advert delivered in good taste? Do you find the color, music or architecture relating to an experience pleasing? Is everything relating to branding aesthetically pleasing?

References

Terpstra, v. and Sarathy, R. (2000) International Marketing, 8th Edition, Dryden Press.

Hall, E.T. and Hall, M.R. (1986) Hidden Differences: doing business with the Japanese, Anchor Press.

Therefore international marketing needs to take into account the local culture of the country in which you wish to market.

The Terpstra and Sarathy Cultural Framework helps marketing managers to assess the cultural nature of an international market. It is very straight-forward, and uses eight categories in its analysis. The Eight categories are Language, Religion, Values and Attitudes, Education, Social Organizations, Technology and Material Culture, Law and Politics and Aesthetics.

Language

With language one should consider whether or not the national culture is predominantly a high context culture or a low context culture (Hall and Hall 1986). The concept relates to the balance between the verbal and the non-verbal communication.

international marketing

In a low context culture spoken language carries the emphasis of the communication i.e. what is said is what is meant. Examples include Australia and the Netherlands.

In a high context culture verbal communications tend not to carry a direct message i.e. what is said may not be what is meant. So with a high context culture hidden cultural meaning needs to be considered, as does body language. Examples of a high context cultures include Japan and some Arabic nations.

Religion

The nature and complexity of the different religions an international marketer could encounter is pretty diverse. The organization needs to make sure that their products and services are not offensive, unlawful or distasteful to the local nation. This includes marketing promotion and branding.

  • In China in 2007 (which was the year of the pig) all advertising which included pictures of pigs was banned. This was to maintain harmony with the country’s Muslim population of around 2%. The ban included pictures of sausages that contained pork, and even advertising that included an animated (cartoon) pig.
  • In 2005 France’s Catholic Church won a court injunction to ban a clothing advertisement (by clothing designers Marithe and Francois Girbaud) based upon Leonardo da Vinci’s Christ’s Last Supper.