• A company faces six major decisions in

international marketing.
• We discuss each decision in detail in this
chapter.
• Looking at the global marketing environment
• Deciding whether to go global
• Deciding Which markets to enter
• Deciding how to enter the market
• Deciding on the global marketing program
• Deciding on the global Marketing organization
 Looking at the global marketing environment

• Before deciding whether to operate internationally, a

company must understand the international marketing
environment. That environment has changed a great deal
in the past two decades, creating both new opportunities
and new problems.
• The International Trade System
• When selling to another country, a firm may face
restrictions on trade between nations. Governments may
charge tariffs, taxes on certain imported products
designed to raise revenue or protect domestic firms.
Tariffs are often used to force favorable trade behaviors
from other nations.
• Countries may set quotas, limits on the amount
of foreign imports that they will accept in
certain product categories. The purpose of a
quota is to conserve on foreign exchange and
protect local industry and employment.
• Firms may also face exchange controls, which
limit the amount of foreign exchange and the
exchange rate against other currencies.
• A company also may face nontariff trade barriers, such as
biases against its bids, restrictive product standards, or
excessive host-country regulations.
• At the same time, certain other forces can help trade
between nations. Examples include the General Agreement
on Tariffs and Trade (GATT) and various regional free
trade agreements.
• GATT designed to promote world trade by reducing tariffs
and other international trade barriers. Since the treaty’s
inception in 1947, member nations (currently more than
153) have met in eight rounds of GATT negotiations to
reassess trade barriers and establish new rules for
international trade. Example the first seven rounds of
negotiations reduced the average worldwide tariffs on
manufactured goods from 45 percent to just 5 percent.
• The agreement also extended GATT to cover trade
in agriculture and a wide range of services, and it
toughened the international protection of
copyrights, patents, trademarks, and other
intellectual property.
• In general, the WTO acts as an umbrella
organization, overseeing GATT, mediating
• global disputes, helping developing countries
• build trade capacity, and imposing trade sanctions.
• Regional Free Trade Zones
• Certain countries have formed free trade zones or
economic communities. These are groups of nations
organized to work toward common goals in the regulation
of international trade. Example one such community is the
European Union (EU). Formed in 1957, the EU set out to
create a single European market by reducing barriers to the
free flow of products, services, finances, and labor among
member countries and developing policies on trade with
nonmember nations. The EU represents one of the world’s
largest single markets.
• In 1994, the North American Free Trade Agreement
(NAFTA) established a free trade zone among the
United States, Mexico, and Canada. The agreement
created a single market too.
• Each nation has unique features that must be
understood.
• A nation’s readiness for different products
• and services and its attractiveness as a market to
foreign firms depend on its economic, political-legal,
and cultural environments.
 Economic environment
• The international marketer must study each country’s
economy. Two economic factors reflect
• the country’s attractiveness as a market: its industrial
structure and its income distribution.
• The country’s industrial structure shapes its product
and service needs, income levels,
• and employment levels. The four types of industrial
structures are as follows:Subsistence economies, Raw
material exporting economies, Emerging economies
(industrializing economies) Industrial economies
• The second economic factor is the country’s
income distribution. Even poor or emerging
economies may be attractive markets for all
kinds of goods.
 Cultural Environment
• Each country has its own folkways, norms, and taboos. When
designing global marketing
• strategies, companies must understand how culture affects
consumer reactions in each of its world markets. In turn, they
must also understand how their strategies affect local cultures.
• Impact of culture on marketing strategies
• Sellers must understand the ways that consumers in different
countries think about and use certain products before planning
a marketing program. There are often surprises.
• Companies that ignore cultural norms and differences can
make some very expensive and embarrassing mistakes.
 Political-Legal Environment
• Nations differ greatly in their political-legal
environments. In considering whether to do
• business in a given country, a company should
consider factors such as the country’s attitudes
toward international buying, government
bureaucracy, political stability, and monetary
regulations. For example, a nation may bother
foreign businesses with import quotas, currency
restrictions, and other limitations that make operating
in foreign nation a challenge.
• Business norms and behavior also vary from country
to country.
• By the same token, companies that understand
cultural nuances can use them to their advantage
when positioning products and preparing campaigns
internationally.
• Thus, understanding cultural traditions, preferences,
and behaviors can help companies not only avoid
embarrassing mistakes but also take advantage of
cross-cultural opportunities.
Impact of marketing strategy on culture

• Critics worry that, under such

“McDomination,”countries around the globe
are losing their individual cultural identities
• Different forces in competitive environment
has to be analyzed to enhance business
international competitiveness. Different frame
work can be used such as ;
• SWOT-TOWS analysis has to be concise,
authentic, significant and actionable.
• Industry analysis(Porter’s five forces)
Porter’s five forces.
Porter's 5 Forces outlines five key competitive forces
that make up every industry including:
• Bargaining power of suppliers
• Bargaining power of Buyers
• Threats of New Entrants
• Threats of Substitutes
• Rivalry among existing competitors/Competition of
existing competitors in the industry
 Deciding Whether to Go Global
• Not all companies need to venture into
international markets to survive. For example,
• most local businesses need to market well only in
their local marketplace. Operating domestically is
easier and safer. Managers don’t need to learn
another country’s language and laws. They don’t
have to deal with unstable currencies, face
political and legal uncertainties, or redesign their
products to suit different customer expectations.
• Before going abroad, the company must weigh several risks
and answer many questions about its ability to operate
globally.
• Can the company learn to understand the preferences and
buyer behavior of consumers in other countries? Can it
offer competitively attractive products? Will it be able to
adapt to other countries’ business cultures and deal
effectively with foreign nationals? Do the company’s
managers have the necessary international experience?
• Has management considered the impact of regulations and
the political environments of other countries?
 Deciding Which Markets
to Enter
• Before going abroad, the company should try to
define its international marketing objectives and
policies. It should decide what volume of foreign
sales it wants. Most companies start small when
they go abroad. Some plan to stay small, seeing
international sales as a small part of their
business. Other companies have bigger plans,
seeing international business as equal to or even
more important than their domestic business.
• The company also needs to choose in how many
countries it wants to market.
• Next, the company needs to decide on the types
of countries to enter. A country’s attractiveness
depends on the product, geographical factors,
income and population, political climate, and
other factors. After listing possible international
markets, the company must carefully evaluate
each one. It must consider many factors.
 Deciding How to Enter the Market

• Once a company has decided to sell in a

foreign country, it must determine the best
mode of entry. Such options differ in terms of
costs involved, risks, and extent of control the
organization intends to have.
• Consequently, one of the most strategic
decision in international marketing is the entry
mode a firm needs to opt for.
• “A market entry strategy is the planned method of
delivering goods and/or services to selected target
markets beyond national bounderies and the
distribution system to be engaged there upon”
• Organizations intending to go international are
faced with three basic issues: 1. Marketing,
2. Sourcing, and 3. Investment and Control
• Marketing: The organization must be sure with;
which countries, which segments, how to enter,
how to manage, with which information.
• Sourcing: The organization needs to know exactly
whether it is to obtain products, make or buy
• Investment and Control: The organization
must decide whether it goes for Joint Venture,
Global Partner or Acquisition.
• Market entry strategies for firms that need to go
international include the following.
• Exporting
The simplest way to enter a foreign market is through
exporting. Entering a foreign market by selling goods
produced in the company’s home country, often with
little modification. The company may passively export
its surpluses from time to time, or it may make an
active commitment to expand exports to a particular
market.
• Companies typically start with indirect exporting,
working through independent international
marketing intermediaries. Indirect exporting
involves less investment because the firm does not
require an overseas marketing organization or
network. It also involves less risk.
• Direct exporting, whereby they handle their own
exports. The investment and risk are somewhat
greater in this strategy, but so is the potential return.
 Advantages of exporting
• Entering Foreign markets through exporting has
the following advantages:
• Manufacturing is home based, thus it is less risky
than overseas based.
• Gives the opportunity to learn and understand
the foreign markets before deciding to invest in
‘bricks and mortar.’
• Reduces the potential risks in operating overseas.
 Disadvantages
• The main disadvantage of this approach is
simply the fact that – ‘one can be at the mercy
of overseas agents and so the lack of control
must be weighed against the advantages.’
 Franchising
• Franchising is basically ‘the practice of using another
firm’s successful business model. ’It is a contractual
agreement between frachisor and franchisee.
• Countries world wide have got laws and rules that
guide franchising practices.
• In terms of distribution, the franchisor is a supplier that
allows the distributor (the franchisee) to use the
supplier’s trademark and distribute the supplier’s
goods.
• In return, the franchisee pays the franchisor some fee.
• Franchisors’ success depends on the success of
franchisees.
• The franchisee is said to have a greater
incentive than an employee because he/she has
a direct stake with the business.
• Franchising has the following advantages:
1) Proven products/services
2) Proven Trade Mark
3) Reduced Risk of Failure.
• Disadvantage
• Lack of full control
• Cost of protecting goodwill and brand name,
search for competent franchisee can be
expensive and time consuming(seen from
franchisor’s viewpoint)
 Licensing
• Licensing is a simple way for a manufacturer to enter international
marketing. The company enters into an agreement with a licensee in
the foreign market. For a fee or royalty payments, the licensee buys
the right to use the company’s manufacturing process, trademark,
patent, trade secret, or other item of value. Licensing involves little
expense and involvement other than signing the contract and
implementing it.
• The company thus gains entry into a foreign market at little risk; the
licensee gains production expertise or a well-known product or name
without having to start from scratch.

• Licensing has potential disadvantages, however. The firm has less

control over the licensee than it would over its own operations.
Furthermore, if the licensee is very successful, the firm has given up
these profits, and if and when the contract ends, it may find it has
created a competitor.
• It is very much related to the “Franchise”
arrangements.
• Coca Cola is the best example of licensing
arrangements.
• Some of the advantages of Licensing include:
• Good way to start in foreign operations and open
the door to low risk manufacturing relationships.
• Linkage of parent and receiving partner interests
means getting most out of marketing efforts.
• Capital is not tied up in foreign operations
• You enjoy the chances to buy into partner or
provision to take royalties in stock
 Disadvantages

• Despite the mentioned advantages, Licensing has

the following disadvantages:
• Limited form of Participation - to length of
agreement, specific product, process or trademark.
• Potential returns from marketing and
manufacturing may be lost.
• Partner may develop adequate know-how and so
license may be shortened or stopped
• Licensees may easily turn into competitors –
through cross technology transfer deals,
• Requires considerable fact finding, planning,
investigation and interpretation.
 How franchise and licensing differ
Licensing Franchising
The term royalties is normally used Management fees is regarded as the
appropriate term
Product, or even a single product are the Covers the total bussiness, Including know
common element. how, intellectual rights, goodwill,
trademarks and business contacts.
License are usually taken by well Tends to be start up situations, certainly as
established business regards the franchisee
Terms of 16-20 years are common, The franchise agreement is normally for
particulary where they relate to technical five years, sometimes extending to 11
know-how, copyright and trade marks. the years. Franchises are frequently
terms are similar for patent. renewable.

Licensee enjoy substantial measure of free There is a standard fee structure and any
negotiation. As bargaining tools they can variation within an individual franchise
use their trade muscle and their system would cause confusion and chaos
established position in the market place.
 Joint Venturing

Joint venturing—joining with foreign

companies to produce or market products or
services. Joint venturing differs from exporting
in that the company joins with a host country
partner to sell or market abroad. It differs from
direct investment in that an association is formed
with someone in the foreign country.
• This is defined as ‘an enterprise where two or more
investors have ownership and control of Property
Rights and Operations.’
• It is a very common way of entering into foreign
markets.
• Any form of association which implies
collaboration for more than transitory period is a
joint venture.
• A joint venture may be brought about by a foreign
investor showing interest in a local company OR
• A local firm acquiring interest in an existing
foreign firm OR
• Both a foreign and a local entrepreneurs
forming a new firm.
• Advantages of Joint ventures
• Sharing Financial Strengths and Costs
• Sharing Risk
• May be a means to entering into another
country
• Disadvantages of Joint ventures
• Partners do not have full control of
management,
• May be impossible to recover capital if need
be, Partners may have different views on
expected benefits.
 Contract manufacturing

• This is when a company doing international marketing

contracts with firms in foreign countries to
manufacture or assemble the product while retaining
the responsibility of marketing the product.
• This is a very common phenomenon in international
business.
• The drawbacks of contract manufacturing are
decreased control over the manufacturing process and
loss of potential profits on manufacturing. The
benefits are the chance to start faster, with less risk,
and the later opportunity either to form a partnership
with or buy out the local manufacturer.
• Manufacturing is outsourced to an external
partner, specialized in production and production
technology.

• Care need to be exercised in negotiating the

contract. where the firm loses direct control over
manufacturing function, mechanism need to be
developed to ensure that the contract manufacturer
meet the firm’s quality and delivery standards.
• Management contracting
• A joint venture in which the domestic firm
• supplies the management know-how to a
• foreign company that supplies the capital;
• the domestic firm exports management
• services rather than products.
• For example, one of the hotel a Doubletree by Hilton in
the United Arab Emirates. The property is locally owned,
but Hilton manages the hotel with its world-renowned
hospitality expertise
• Management contracting is a low-risk method
of getting into a foreign market, and it yields
income from the beginning. The arrangement is
even more attractive if the contracting firm has
an option to buy some share in the managed
company later on.
• Management contracting also prevents the
company from setting up its own operations for
a period of time.
 Turnkey Contracts
• Turnkey contracts are common in international
business in the supply, erection and
commissioning of Plants particularly in Oil
Refineries, Steel Mills, Cement Factories,
Fertilizer Plants, Construction Projects and
Franchising agreements.
• A turnkey operation is an agreement by the seller
to supply the buyer with a facility, fully equipped
and ready to be operated by the buyer and to train
the buyer and employees on how to operate it.
• Many turnkey contracts involve governments
and/or public sector as buyers.
• A turnkey contractor may subcontract other
firms to perform parts of the main project.eg
Julius Nyerere Hydropower station.
• Joint Ownership
• A joint venture in which a company joins
• investors in a foreign market to create a local business
in which the company shares joint ownership and
control. A company may buy an interest in a local firm,
or the two parties may form a new business venture.
Joint ownership may be needed for economic or
political reasons. The firm may lack the financial,
physical, or managerial resources to undertake the
venture alone. Or a foreign government may require
joint ownership as a condition for entry. Joint
ownership has certain drawbacks, however. The
partners may disagree over investment, marketing, or
other policies.
Other strategies
• Mergers and Acquisitions
• Fully owned Manufacturing Facilities
• Strategic alliances
 Deciding on the Global Marketing
Program
• The marketing programme for each foreign market
must be carefully planned. Managers must first
decide on the precise customer target or targets to be
served. Then managers have to decide how, if at all,
to adapt the firm’s marketing mix to local conditions.
To do this requires a good understanding of country
market conditions as well as cultural characteristics
of customers in that market.
• Managers must decide wether Standardization or
adaptation for international markets?
 Standardization or adaptation for
international markets?
• Companies can use a standardized marketing
mix worldwide, selling largely the same products
and using the same marketing approaches
worldwide.
• Standardised marketing mix —An international
marketing strategy for using basically the same
product, advertising, distribution channels and
other elements of the marketing mix in all the
company’s international markets.
• Or adapted marketing mix. In this case, the
producer adjusts the marketing mix elements to
each target, bearing more costs but hoping for a
larger market share and return.
• Adapted marketing mix— An international
marketing strategy for adjusting the marketing-
mix elements to each international target
• market, bearing more costs but hoping for a
larger market share and return.
• The question of whether to adapt or standardise the marketing
mix has been much debated in recent years. The marketing
concept holds that marketing programmes will be more
effective if tailored to the unique needs of each targeted
customer group. If this concept applies within a country, it
should apply even more in international markets. Consumers in
different countries have widely varied cultural backgrounds,
needs and wants, spending power, product preferences and
shopping patterns. Because these differences are hard to
change, most marketers adapt their products, prices, channels
and promotions to fit consumer desires in each country.
 Deciding on the global marketing
organization
• There is no single right way to tackle global
markets.
• When deciding upon a structure that best
matches your international needs, the objective
should be to create the most efficient system
based on:
– The needs of your company,
– The needs of your shareholders, and
– The needs of your products and services.
• Ultimately, the structure must be strong enough
to achieve corporate goals and flexible enough
to withstand market pressures.
• By Definition international marketing is the
performance of business activities that direct a
flow of goods and services to consumers or
users in more than one nation for a profit.
• Depending upon your source, there are different
basic marketing structures that can
• support these activities and several operational
factors that can impact your decision of which
structure will work best for your organization:
 Operational Factors
• While the exact descriptions vary somewhat,
marketing structures should be developed based upon
the operational arrangement of a company.
1) The company may be a multinational organization
with primarily overseas operation and a portfolio of
independent, often country-specific, product brands,
2) It may be arranged as an international company in
name, but function primarily as a domestic operation
with overseas sales operations viewed as profit
appendages.
3) A third operational arrangement is more global,
consisting of overseas manufacturing and a sales
pipeline delivery to a unified global market.
4) A fourth operational structure is the most complex:
an organized, integrated network in which overseas
operations may manufacture product components in
one country, assemble in another, distribute globally,
but manage product sales people, or information
among geographically-dispersed, but interdependent
units.
The Basic Decision: Centralized Vs Decentralized

• Once the underlying operation has been identified,

consider how it functions.
• The first basic marketing structure decision that must
be made is whether marketing will be conducted
from a centralized location where decisions are made
at headquarters (HQ) and simply executed in the
field, or if decision-making will be decentralized;
made independently in the regions or countries
where the manufacturing, distribution and sales are
occurring.
• Centralized marketing requires strong
communications and solid organizational
processes to be successful; otherwise, the lack
of communication of company policies and
goals will slow marketing to a crawl.
• It also demands a more uniform approach to
everything from messaging to pricing and
promotional activities.
• On the other hand, Decentralized marketing
allows for localized, or at least country-
specific, decision-making and message
modification based on cultural attributes like
affluence or literacy.
• While it facilitates rapid decision-making, it
can also lead to a fragmented brand.
 Marketing Structures
• After decisions on operational factors and
whether centralization or decentralization, a
firm needs to decide on marketing structures.
• Generally there are three (3) main marketing
structures:
– Aligned Around Products
– Aligned Around Geographic locations
– Aligned Around Processes
 Marketing Structure: Aligned Around
Products
• Marketing structures aligned around products are
focused on the delivery of the products for specific
customer groups.
• Focusing on dedicated cross-functional teams tend to
include product-expert vertical teams, such as a
cross-functional group including product
management, manufacturing facilities, call centers,
direct sales teams, and customer service groups, all
focusing on a specific product or group of products
and a global customer base.
• This marketing structure is aligned around
product expertise and is focused on providing
the best product to meet the needs of the most
customers.
• While there is usually a company headquarters
and management staff, the group is often
multi-national with offices dispersed around
the globe.
 Marketing Structure: Aligned Around
Geographic Areas
• In other international marketing structures,
teams are organized around geographic areas
of the world: North Africa, the
Caribbean/South America, Asia, North
America, etc. They may all deliver the same
group of products, but the team adjusts the
product attributes, positioning, pricing and
messaging based upon the geographic area of
the globe they serve.
• Marketing expertise is not in the products, but
knowledge of the audience to which the
products are to be offered.
• These teams may be cross-functional groups,
and may or may not be overseen directly from
the company's headquarters.
• Typically, they revolve around a geographical
area.
 Marketing Structure: Aligned around
Processes and Activities
• Another marketing organizational structure is
one closely aligned to distribution channels or
the company's physical, in-country
manufacturing capability.
• With this structure, marketing is designed to
focus on key accounts and global direct sales,
or big ticket, multi-million dollar sales with
long lead times. This is common in
manufacturing and technology industries
• Another marketing structure more common in
wholesale/retail sales revolves around seasonal
product lines.
• This includes short lead-time distribution and
activities with set market schedules,
showrooms, and both major and minor accounts.
• The global fashion industry is an example of
this structure.
• Once the firm has decide how it will enter
international market(markets),the next step is
designing the international market mix.