International Marketing. Stated simply, international marketing is marketing across national

Stated simply, international marketing is marketing across national

boundaries. Since the end of World War II, improved travel, communi-

cations, and technology have fostered a tenfold increase in trade among

nations.

The General Agreement on Tariffs and Trade (GATT) was an inter-

national agreement established in 1948 that sought to “liberalize world

trade and place it on a secure basis, thereby contributing to economic

growth and development and to the welfare of the world’s peoples”. It

assisted in reducing trade barriers around the world and in creating more

favourable conditions for world trade. Since GATT was established, this

agreement has helped build world trade from $60 billion to $6 trillion

annually. However, GATT negotiations “to liberalize world trade” could

bog down and extend for years because of the desire of countries to pro-

tect jobs in their domestic industries.

Benefits and difficulties. A company choosing to enter international

markets can achieve many benefits, but it can also encounter many dif-

ficulties.

The main reason for companies to do international marketing is to

exploit a better business opportunity in terms of increased sales and prof-

its. Either firms are limited in their home country or their opportunities

are great in the foreign countries.

Many companies find themselves with little room for growth in their

domestic market. Competition may increase and leave a smaller por-

tion of the pie to enjoy, or demand may shift to a newer, better product.

The economic environment in the home country may be undesirable

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because of higher taxes or a recession. It would seem logical to turn to

other markets in any of these cases, as Japan’s Honda has done.

So foreign markets can offer an opportunity for growth. A product

that is mature and facing dwindling sales at home may be new and excit-

ing in other countries. For example, France’s Sodima whose Yoplait yo-

gurt was in a mature phase of its product life cycle at home, was happy to

license its product to General Mills for sale in the United States, where

yogurt sales were growing rapidly. Similarly, Kellogg hopes that its Corn

Flakes will catch hold in France, where the product is at an early stage in

its product life cycle and competition in the ready-to-eat cereal market

is less intense than in the United States. The following list summarizes

the main reasons why U.S. companies consider entering international

markets.

1. To counter adverse economic factors in the home market.

2. To extend a product’s life cycle.

3. To reduce or avoid competition.

4. To enhance economies of scale in production and marketing.

5. To spread fixed costs over more units sold.

6. To dispose inventories.

7. To export (and import) new technology.

8. To increase profits/shareholder economic well-being.

Is international marketing easy? Not in the least. For the U.S. firms

anxious to enter the Japanese market and make profits quickly, strategy

consultant Kenichi Ohmae reminds them it took perhaps 50 years to

build their U.S. firm and 15 years to develop their European business. So

he asks these firms to recognize that in entering the Japanese market –

one of the toughest markets in the world – it may take at least 25 years

to achieve the same success it found in the United States or Europe. Al-

though international marketing involves the same principles of domestic

marketing, those principles must be applied with care.

Campbell Soup, the company with 60 percent market share in the

U.S. wet soups category, lost $30 million in Great Britain. The problem

was that Campbell didn’t clearly communicate that the soup was con-

densed, and consumers saw it was a poor value compared with the larger

cans stocked next to it.

Americans recognize the brand names of foreign products that have

been introduced successfully here: Honda and BMW cars, Sony TV sets,

Nestle candy bars, and Shell gasoline products.

Global versus customized products. As international marketing grows,

firms selling both consumer and industrial products in foreign countries

face a dilemma: should they use a global or customized strategy in the

products they sell, or a strategy in between?

A global approach is an international marketing strategy that assumes

that the way the product is used and the needs it satisfies are universal.

Therefore, the marketing mix need not be adjusted for each country. In

contrast, a customized approach (or local approach) is an international

marketing strategy that assumes that the way the product is used and the

needs it satisfies are unique to each country. This then requires a market-

ing mix tailored to the needs, values, customs, languages, and purchas-

ing power of the target country. The global approach is less common but

has been successful for some firms.

McDonald’s – the undisputed world hamburger rule – seems to

have achieved the ideal hybrid between a global and a customized strat-

egy. Although it has standardized much of its menu, it gives a degree

of flexibility to franchisees to allow for local customer preferences in

their countries. Experts have coined the term globalization to describe

the McDonald’s approach, which is an international marketing strategy

that seeks to combine the best features of both the global and customized

(local) approaches by encouraging local managers to modify the global

strategy, where appropriate, to the needs of customers in their country.

McDonald’s in Germany and France has beer on its menu, and its

restaurants in Japan offer saki. In the Philippines, where noodle houses

are popular, its customers can find – what else? – McSpaghetti!

Speak on the following:

1. Benefits and difficulties of international marketing.

2. The main reasons and alternatives of entering international mar-

keting.

3. Global versus customized product.

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