Organising For Nondomestic Marketing

Two dimensions of organizing are important to the international

marketing manager. The first concerns the way the firm is organized for

entry into its nondomestic markets and the second deals with how the

firm is organized internally to achieve its marketing objectives. In do-

mestic marketing the entry question does not exist and one is immedi-

ately concerned with the structuring of the marketing activities within

the firm’s organizational chart.

Entry alternatives. Basically, firms may enter an overseas market with

varying degrees of decision-making control over their total operations,

including their marketing efforts. The firm that enters an overseas mar-

ket by establishing a wholly owned subsidiary or by having over 50% eq-

uity obviously has the greater degree of decision-making control.

When a firm is exporting to a market, it potentially has no say on how

its product or service is to be marketed, although in practice it can dis-

continue exporting through an uncooperative middleman. Similarly, by

licensing the production of its product, the firm has only those decision-

making controls that are established in the original agreement. These

generally relate to quality control and the territory covered. In either in-

stance (exporting or licensing), the international marketing manager has

limited control over the marketing techniques used in overseas market.

Many firms have tended to prefer entry through the use of wholly

owned subsidiaries. This entry method provides a maximum operational

control and the greatest protection to a firm’s technology and the quality

of product sold under its brand name. However, it also entails the great-

est risk.

In more recent years, the trend has been toward entry through a joint

venture agreement. Among the joint venture’s advantages is the fact that

it permits sharing the risk while still obtaining a measure of control and

participating in the profits in the market. Further, since a joint venture

agreement if often made with an existing firm in the overseas market, the

joint venture may have the additional benefits of reducing competition

and gaining local market expertise and contacts. An even more recent

development is the establishment of country-company partnerships.

An even more compelling factor favoring a joint venture is the foreign

investment regulations that now exist in a number of countries. The

market in which the firm wishes to enter may simply require the estab-

lishment of a joint venture and dictate the percentage of equity that the

outside investor may hold. This directly affects the decision-making

control of the international marketing manager because his ability to

conduct marketing planning becomes restricted.

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