Introduction

International marketing refers to marketing carried out by companies overseas or

across national borderlines. This strategy uses an extension of the techniques used in
the home country of a firm. International marketing is simply the application of
marketing principles to more than one country.

International marketing involves recognizing that people all over the world have
different needs. Companies like Gillette, Coca-Cola, BIC, and Cadbury Schweppes
have brands that are recognized across the globe. While many of the products that
these businesses sell are targeted at a global audience using a consistent marketing
mix, it is also necessary to understand regional differences, hence the importance of
international marketing. Organizations must accept that differences in values,
customs, languages and currencies will mean that some products will only suit certain
countries and that as well as there being global markets e.g. for BIC and Gillette
razors, and for Coca-Cola drinks, there are important regional differences - for
example advertising in China and India need to focus on local languages.
Just as the marketing environment has to be assessed at home, the overseas potential
of markets has to be carefully scrutinized. Finding relevant information takes longer
because of the unfamiliarity of some locations. The potential market size, degree and
type of competition, price, promotional differences, product differences as well as
barriers to trade have to be analyzed alongside the cost-effectiveness of various types
of transport. The organization then has to assess the scale of the investment and
consider both short-and long-term targets for an adequate return.
Information on foreign markets will often be in foreign language; may be hard to
obtain and is frequently difficult to interpret. Further, problems that arise in the course
of international marketing are, product and promotional method may have to be
modified to suit the need of specific countries, difficulties of distribution channels,
diverse national laws on advertising, consumer protection, sales promotion etc.
Therefore the marketers who engage in international trade have to use various
marketing strategies remain in the market.

1
Nature of International Marketing

L.S. Walsh defines international marketing as: the marketing of goods and services
across national frontiers; and the marketing operations of an organization that sells
and or produces within a given country when:
I. That organization is part of, or associated with, an enterprise which also
operates in other countries; and
II. There is some degree of influence on or control of that organization’s marketing
activities from outside the country in which it sells and or produces.

The essential principles of marketing apply to international operation as much as they

do to domestic trade, although a global outlook is required and the problems of
international marketing are more extensive than for international trade. International
marketing require multinational communications, and numerous cultural factors have
to be taken in to account.

The international marketing concept

The marketing concept is the idea that a firm should seek to evaluate market
opportunities before production, assess potential demand for the good, determine the
product characteristics desired by consumers, predict the prices consumers are willing
to pay, and then supply goods corresponding to the needs and wants of the target
markets.

The Marketing Mix

Marketing is a collection of activities that includes selling, advertising, public

relations, sales promotions, research, new product development, package design,
merchandising, the provision of after sales service, and exporting. The term marketing
mix describes the combination of marketing element used in a given situation.
Appropriate mixtures vary depending on the firm and industry. Major element of the
marketing mix can be listed under the four headings:

2
 a) Promotion-including advertising, merchandising, public relations and the
utilization of sales people.
b) Product- design and quality of output, assessment of customer needs, choice of
which product offer for sale, and after sale service.
c) Price –choice of pricing strategy and prediction of competitors’ responses.

d) Place- selection of distribution channels and transport arrangements.

A firm’s marketing mix will normally (but not necessarily) have to be adopted for
international marketing in consequences of the many national differences that exist in
relation to stage of economic development, social systems, technological
environments, legal framework, competitive situation, business practices and cultural
perspectives. Promotion policy, for example, has to consider disparate laws and
regulations on advertising and sales promotions, while pricing policies need to take
into account wide variations in norms relating to credit and delivery terms in various
states.

International Advertising

The key issue in international advertising is whether the firm should standardize its
advertising message or adopt them to meet the requirement of particular foreign
markets. Some advertising message are applicable to several countries, others are
relevant to only one. Much depend on the degree of homogeneity of target consumers
in various countries, their lifestyles, interest, income and tastes. The advantages of
uniformity are that it:
• Require
• Less marketing research in individual countries
• Is relatively cheap and convenient to administer
• Demand less creative time to device advertisements; a single message is
constructed and used in all markets.
Customization conversely might be necessary in consequence of:
• Cultural differences between countries and or market segments
• Translation difficulties between different languages.

3
 • Difference in the educational backgrounds of target group in various countries.
• Non availability of certain media in some regions.
• Differences in national attitudes towards advertising.
To the extent that alterations are needed they may take one or more of the following
forms:
a) Different media. For instance listeners to commercial radio in different
countries might typically belong to different socio economic groups.
b) Changes in symbols, e.g. using a male rather than a female model as the
dominant figure in an advertisement. This might be necessary if males as the
primary purchasers of the product in one market and female in another.
c) Changes in advertisement heading and copy.
d) Changes in the fundamental selling proposition. For instance, presenting a
bicycle as a leisure item in one market, a fashion necessary in another, and as
a commuting vehicle elsewhere.

International sales promotions

Sales promotion covers the issue of coupons, the design of competitions, special
offers, distribution of free samples, etc. the objectives of sales promotion campaign
include:
• Stimulation of impulse purchasing
• Encourage customer loyalty
• Attracting customers to the firms premises
• Penetration of new markets
• Increasing the rate at which customers repeat their purchases

Promotional techniques need to relate to the specific aims of the exercise

Such as free samples to enter new markets, reduced- price offers to encourage repeat
purchase, money off coupons to attract customers to the premises, etc.

The use of sales promotions as a marketing weapon has expanded rapidly throughout
the world. Unfortunately, however, international business wishing to employ sales
promotions for cross border campaign face a number of serious practical difficulties,

4
because in many nations the use of certain sales promotions techniques is regarded as
unfair competition, and as such is subject to stringent legal control. Indeed,
conflicting laws sometimes apply to these matters in various countries. The
justification for the latter is that the distribution of free gifts can be interpreted as a
form of dumping undertaken merely to force rival companies out of business. Other
criticisms of the use of sales promotion suggested by the governments that severely
restrict or ban them are that the true value of the promoted item is concealed since
consumers are improperly influenced by the special offer accompanying the sale, and
that consumers cannot meaningfully compare the prices of similar competing goods
because of the distortions and destructions that sales promotions introduced. Some
governments allege moreover that large firms which possess the resources necessary
to plan and implement extensive sales promotion campaign enjoy an inequitable
advantage over smaller rivals.

International Branding

A product is anything a business has to sell, whether this is a physical good or

service. New products could be completely fresh innovations or modification of
existing products or copies of other firm’s products. Branding a product means giving
it a trade name or logo then, seeking via advertising other sales promotion associate
certain attractive characteristics with the branded item. Customers then recognize the
product and having once been satisfied by it, need no subsequently re-evaluate its
worth. Thus, little fresh information about the products has to be provided to the
customers it has been branded.

Choice of brand name

Brand names used in the foreign market need to be internationally acceptable, distinct
and easily recognizable, culture free, legally available and not subject to local
restrictions. A brand name is far more than a device to identify the supplier of a
product; it is an advertisement in its own right and means for arousing in customers a
set of emotions and mental images conducive to selling the item. Short, simple, easily
read and easily pronounce brand names are usually best for foreign markets. Such

5
names can be used in several countries simultaneously, for family branding, and may
be supported within advertisements by a wide variety of pictorial illustrations.

Brand Positioning

Market positioning involves finding out how customers think about the firms product
in relation to competing products, with view either to modifying product to make it fit
in with these perceptions, or to changing the product position in consumers mind.
Positions depend on the nature of the product, competing products and on how
consumers see themselves. The essential issue is whether to attempt to position a
brand similarly in all the nations in which the firm wishes to sell its output or to
attempt different positions for the item in each country. A number of factors should
influence the decision whether to opt for a single or different position in various
countries, as follows.

a) The degree of direct and immediate substitutability between the advertised

output and locally supplied brands.

b) The scope of the product’s appeal: whether it sells to a broad cross section of
consumers or only within small market niches.

c) The extent to which a product’s selling points is perceived similarly in

different nations.

d) Whether the item fulfills the same consumer needs in each market.

e) Whether the brand name and/or product features need to be altered for use in
the desperate markets.

Positioning a brand in the same location in all foreign markets has a number of
practical advantages, as follows.

a) The firm can concentrate all its creative effort on a handful of variables
equally relevant to all markets.

6
 b) Standardization of advertising is facilitated, leading to many cost
saving.

c) A similar price can be changed in each market, so that common price

list catalogues and other price sensitive promotional materials can be printed.

d) Similar demographic and lifestyle will be variable reached in each

country. Hence, the firm only needs to monitor a few key statistics in the
nations in which the product is used.

Valuation of Brand
Brand names are valuable assets in their own right. They can be sold, mortgaged,
assigned to others or licensed in return for a royalty or lump sum payment.
Increasingly, firms prefer to acquire local firms that already possess strong brand
images in foreign countries rather than incur the expense of introducing and
developing their own brands in unfamiliar markets. Also, brand values often appear as
intangible assets in company balance sheets, ands the amounts stated have significant
implications for the borrowing power of the firm.
Ultimately, the only way to value a brand is to sell it to the high bidder on the open
market. Unfortunately, there is typically no genuine competitive market when a brand
comes up for sale: bi-lateral haggling between the brand owner and a single possible
buyer normally applies. The vender will probably begin in the negotiation from a
brand valuation based on the worth of the brand when used in the vendor’s own
business, which will depend on factors such as:
• The amount that has been spent on the introducing and developing the brand

• The competitive situation and the risk of new brands entering the market.

• Whether the brand is a market leader or market follower

• The number of countries in which the brand can be used without significant
adaptation

• Trends in consumer fashion likely to affect brand performance

7
 • An estimate of the difference between the retail price made possible by selling
the firm’s output under the existing brand name and the price at which it
would have to be sold if unbranded

• The long –term stability of demand created by consumer loyalty towards the
brand

• Relations between the brand image and the firm’s overall corporate image

A firm considering purchasing an existing brand, conversely, will be concerned with:

• Fluctuations in the annual sales and the expected life of brand

• The brand’s ability to stand alone and create good profits without
having to rely on the sale of other goods, brands or service

• The brand’s market position

• Consumer brand awareness and brand loyalty, Independent of the

company owning the brand

• The magnitude of the flow of income expected to be generated by the

brand in comparison with the return to be had from investing in some
other form of asset.

Transfer Pricing

Transfer pricing means the determination of the” prices” at which a Multi National
Company (MNC) moves goods between its subsidiaries in various countries. A
crucial feature of large centralized MNCs is their ability to engage in transfer pricing
at artificially high or low price. To illustrate, consider an MSN which extracts raw
materials in one country, uses them as production inputs in another, assembles the
partly finished goods in a third, and finishes and sells them in a fourth. The
governments of the extraction, production and assembly countries will have sales or
value added taxes, while the production, assembly and finish goods countries will

8
impose tariffs on imports of goods. Suppose the MNC values its goods at zero prior to
their final sale at high prices. The government of extraction country receives no
revenue from sales taxes because the MNC’s subsidiary in that country is selling its
output to the same MNC’s subsidiary in the production country at a price of zero.
Equally the production country raises no income from import tariffs on this
transaction because the raw materials are imported at zero prices. The only tax the
MNC pays is a sales tax in the last country in the chain. Transfer pricing at
unacceptably low value has been a major problem for many developing nations.
Sometimes, therefore, the government of the country in which an MNC operates will
insists that a government official shall decide the price at which the MNC exports its
output and not employees of the MNC itself. Thus, the government of the host
country will ensure that it receive an appropriate account of sales tax. Similarly,
importing countries might impose quantity base instead of price based import duties
to ensure reasonable revenue from taxes on imports of an MNC goods.
Tax consideration aside; transfer prices need to be realistic in order that the
profitability of various international operations may be assessed. Possible criteria for
setting the transfer price include.
• The price at which the item could be sold on the open market (this is known as
‘arms length’ transfer pricing).
• Cost of production or acquisition.
• Acquisition/production cost plus a profit markup (note the problem here of
deciding what constitutes an appropriate profit markup).
• Senior management’s perception of the value of the item to the firm’s overall
international operations.
• Political negotiation between the units involved (a high or law transfer price can
affect the observed profitability of a subsidiary).

Normally the solution adapted is the which (seemingly) maximizes profits for the
company taken as a whole and which best facilities the parent firm’s control over
subsidiary operations. Arm’s lengths pricing is the method generally preferred by
national government and is recommended in a 1983 code of practice on the subject
drafted by the organization for Economic Co-operation and Development (OECD),
Note how a subsidiary that charges a high transfer price will accumulate cash, which

9
 might be invest more profitable in the selling country than elsewhere. Problems with
setting a realistic transfer price as follow:

• Difference in the accounting system used by subsidiaries in different

countries.
• Executives in operating units deliberately manipulating the transfer price to
enhance the book value of a subsidiary’s profit.
• Disparate tax rate and investment subsidy levels in various countries.
• Possible absence of competition in local markets at various stages in the
supply chain. Thus a ‘market price’ in such an area may be artificially high in
consequences of the lack of local competition.
• There might not be any other product directly comparable to the item in
question, again making it difficult to establish a market price.
• If a price is set at too high a level the ‘selling’ unit will be able to attain its
profit target too easily (at the expense of the ‘buyer’) and lead perhaps to
idleness and inefficiency in the selling subsidiary.
Special problems arise when goods are being transferred among the partners of a joint
venture.
Distribution Channels

A distribution channel is a route from the producer of a good to the final consumer.
Functions of a distribution channel include the physical movements of goods awaiting
transit and or sale, transfer of title to the goods, and their presentation to final
purchaser. There are four main categories of distribution system as follows.

 Direct to consumers
E.g. mail order or if the supplier owners and controls its own outlets. No
intermediaries are involved, so price can be lower and the firm can ensure that its
goods are properly [resent to local consumers. The method is commonest among
companies,
i) With very large volumes of international business (and thus able to justify
establishing a separate sales organizations),
ii) With technically complicated product, and,

10
 iii) Where customers are geographically concentrated and place high value
orders.

 Producer to retailer
Here the retail bears the cost of storing good awaiting sale. The supplier must
employ sale persons to canvass retail outlets and to merchandise the product.
Retail sell the goods, possibly offer credit, provide product information to
customers, and ensure that goods are available in small quantities throughout the
year. Franchising is a special case of the method.

 Producer to intermediary
The advantage of selling to an intermediary (export merchant for example)
include,
i) Less administration (there is no need for a sale force, no need for a sale
force ,no warehouse cost, fewer deliveries, and negligible invoice and debt
collecting) and
ii) The transfer of the risk of product failure from the supplier to the
intermediary. However final price will be higher and intermediaries typically
handle competing lines.

 Through agents
An agent will (for a commission) find foreign customers for a company’s
products, but if the goods are defective, damaged or delivered late it is the
client and not the agent who is responsible.

International distribution differs from its domestic counterpart in the following

respects:
 The range of available options is more varied. An MNC can establish its own
distribution system or may opt to use locally controlled channels.
Standardization of the methods and procedures used by an MSC for
international distribution is extremely difficult because of the big difference that
exit in the national distribution system. Hence, the MSN’s task is to identify and
utilize that combination of directly owned foreign sales subsidiaries, wholesales,

11
 import agent and other intermediaries, and retailers necessary to ensure that its
products are available to customers where and when they are needed and at a
reasonable price.
 Distribution channels are usually longer than for domestic business.
 Delays and holdups at various points in international distribution systems are
common.
 Wholesaling and retailing systems differ markedly from continent to continent.

Factors influencing national distribution system include.

 Consumer demand pattern. Suppliers in some countries insist on
buying their goods in small quantities from nearby store which they visit
frequently; else where people prefer to shop in large retail outlets on a weekly
or fortnightly basis.
 Wage level paid to retail workers.
 Competition rules within the nation. In Japan, for example buying a
shop is a popular second carrier for many business executives who retire in
their early fifties.
 Local laws restricting the size and nature of retail outlets.
 Popularity of mail order buying.

Laws and Regulations on Advertising

These vary from country to country. Comparative advertising, for example, is

unlawful in many nations. (Comparative advertising involves the comparison of an
advertised item with competing product or mention of rival firms.) The use of
superlatives in advertising copy is allowed in the UK, Belgium and Italy, but not in
Germany or France9at least not on television). In the Netherland, superlatives have to
be backed up by factual evidence. There are severe constraints on the use of
pornography and / or sexual innuendo in advertisements in a number of countries:
advertising in foreign languages is sometime banned. Other legally sensitive areas in
the international advertising field include the use of children as models; the creative
approaches that may be employed the media permitted to carry advertisement and the

12
amounts of advertising allowed in each medium. The advertising of ‘health’ goods,
pharmaceuticals, war toys, alcohol and tobacco are subject to stringent control in the
great majority of nations

EU law on agency

Agency law in the European Union has been harmonized via the commercial agents’
directive 1986, under which any individual o company acting as an agent (excluding
bankruptcy receivers and insolvency practitioners; partners, employees or officers of
firms; or commodity dealers) has the right to receive the following on termination of
an agency agreement:
a) Full payment for any transaction predominantly attributable to the agents work
during the period of the agency, even if the transaction is concluded after the
agency has been terminated.

b) A lump sum not exceeding the agent’s average commission for one year. To
complete this average the agents earning over the last five years are
considered. The lump sum could be payable if the agency has ended because
of the death of the agent.

c) Damages for loses in appropriate circumstances.

The above represents the minimum level of compensation payable; national

government may impose further requirements if they so wish. Thus, for example,
French agents are legally entitled to one monthly notice for each year of service up to
a maximum of three months and up to two years’ past average commission is
payable. In Germany, principals must give agents one to six months’ notice,
depending on the duration of the agreement. Dutch agents are entitled to four month
notice plus one extra month if the agreement has lasted for six year; two extra months
if the agreement has lasted for six years, and may obtain payment for contribution to
the principal’s goodwill up to the value of one year commission.

13
EU law on exclusive distribution

The European commission has issued a block exemption releasing virtually all small
to medium sized business from EU legislation in the exclusive distribution field.
Under the exemption, agreement between pairs of undertakings whereby one agrees to
supply exclusively to the other pre-specified good s for resale in the certain area and
which require he distributor to obtain good s only from the other party, are legal
provided:
a) There is an alternative local service of supply for the type of product involve
in the agreement

b) The supplying firms output is available from at least on other source than the
distributor.

c) One of the parties to the deal has an annually turnover of less than ECU 100
million.

d) The goods supplied under the agreement have a market share of less than five
percent.

Also, manufacturers of the same type of product cannot appoint each other as
exclusive distributors in order to carve up the total European market, e.g. if a British
manufacturing firm has its British counterpart as its exclusive distributors in France
and vice versa, so that consumers only have one source of supply in either country.
Distribution to selected distributors whereby the supplier is prepare to sell only to
particular dealers who then not to resell to anyone other than end users, are not
generally covered by the distribution block exemption because of the control over the
prices they might allow. However, the commission has agreed not to take action
against suppliers so long as:

a) The agreement is ‘reasonably necessary’ e.g. by virtue of the needs for special
facilities for selling the product, for after sale services, or for technical expertise
among distributors.

14
 b) Quantitative limits are not placed on the number of approved dealers within a
specific area.

c) Selection criteria are objective and applied uniformly. Example of, suitable
yardstick are the dealers’ technical knowledge, caliber of premises or extent of
facilities.

d) Completion within the market is not adversely affected.

Conclusion

Now we are living in highly globalized and integrated world economy. Owing to the
continuous liberalization of international trade and investment and rapid advances in
telecommunications and transportation technologies, the world economy will become
even more integrated.
So international marketing refers to the merging of historically distinct and separate
national market in to one huge global marketplace. So countries can take advantages
of national differences in the cost and quality of factors of production (such as labour,
energy, land and capital). By doing this companies hope to lower their overall cost
structure and improve the quality of products.

15
International marketing is consist a collection of activities that includes selling,
advertising, public relations, sales promotion, research and development, package
design, branding, after sales services, and exporting.

International marketing requires multinational communications, and numerous

cultural factors have to be taken in to account. So there are some problems like
foreign market will often be in foreign languages, environment might be turbulent and
unpredictable, distribution channels are sometimes very long, divers laws on
advertising, consumer protection, sales promotion, and pricing decision have to take
account currency exchange rate fluctuations. Even though country faces these
problems they have to adopt those problems because, a single country cannot survive
separately.

Reference

1. Margeret woods, 2003, International Business an introduction,

Replika press (Pvt) Ltd, India.
2. Roger Bennnett , 2005, International Business, 2nd Edition, person

Education (Pvt) Ltd, Dilhi.

3. Anat K Sunderam, J Stewart Black, 1997, International Business
Environment, Prentice hall of India, new Dilhi.
4. Devandra thekur, santhosh K Mishra, 1989, International Business,
Deep and Deep publication, New Dilhi.

16
17