4.7 International Marketing
(HL ONLY)
Why do we companies go international?
Growth - The home market could be saturated and/or competition is too fierce. Increasing sales by going international allows for realization of economies of scale.
Diversification - If the economy is bad at home during certain periods, it may be best to diversify elsewhere
How to expand internationally?
Exports - The company's products are sold in foreign countries either through e-commerce, through exclusive dealers or via import-export companies that are willing to move the product and sell it.
Licensing of Production - In some cases, foreign companies can be granted exclusive licenses to actually produce the product in the foreign market according to the specifications set by the licenser.
Franchising - A franchisee with local knowledge may be better suites to running the business in a foreign country. The franchisor may grant exclusive agreements to an individual or a company to run all the outlets in a given company, or rely on many different local and international franchisees
Joint Ventures - The local partner could be expected to bring his/her knowledge of the country's culture and business climate to the foreign company to expand operations. A joint venture must have established clear divisions of responsibilities.
Foreign Direct Investment - The company expanding internationally can decide to stay alone and build its own operations in a foreign country, usually through a subsidiary. This allows complete control over foreign operations. The company's lack of knowledge of the foreign country can be corrected by hiring local managers.
Companies that go international have a choice to make between these two strategies:
Standardisation:
The product and the marketing mix is basically the same worldwide
Localisation:
The product and the marketing mix are ADAPTED to local conditions
Opportunities of Entering New Markets
Increased customer base - more sales
Economies of scale
Gain more profit
Increased brand recognition
Spread risks
Home market is saturated
Lucrative markets in other countries
Tax incentives
Methods of Entry
Exporting
Direct Investment
E-Commerce
Joint Venture
Strategic alliance
Franchising
Licensing
Takeover/Mergers
Threats with Entering New Markets
Legal:
Different countries have completely different legal systems and laws. Particular types of laws:
Copyright & patent protection
Consumer protection laws
Political:
Trade barriers
Administrative barriers/bureaucracy
Taxation
Political unrest
Corruption
Economic:
Exchange rates fluctuations
Inflation
Interest rates
Income levels
Threats with Entering New Markets (extended)
Social and Demographics:
Cultural differences
Different consumer tastes
Internet uptakes
Demographics
Carrying income levels
Language barriers
Slogans are usually mistranslated.
KFC in China
Pepsi in Taiwan
Logistics:
Increased transportation costs
Longer lead times
Longer/more complicated supply chains
Time differences