International Marketing: Strategy, Analysis, and Global Market Entry

Posted on Dec 1, 2024 in Economy

The Importance of International Marketing

International marketing is a crucial global economic activity. Historically, trade between nations has been a source of wealth for economic powers. Access to foreign markets can transform a product considered commonplace locally into a high-value item internationally. For example, while alpaca wool sweaters may be everyday items in Bolivia, in European and U.S. markets, baby alpaca wool is a premium, high-fashion material.

International Marketing Defined: All activities related to trade between different countries.

International Market Activities: Market research, developing marketing plans, managing the 4Ps (Product, Price, Place, Promotion), and international logistics, applied to activities between two or more countries.

Balance of Payments: An economic indicator reflecting a country’s profitability.

Trade Balance: The relationship between imports and exports, with three possible scenarios:

  1. Surplus: Exports exceed imports (e.g., China, Brazil).
  2. Equalization: Exports equal imports.
  3. Deficit: Imports exceed exports.

Exporters should aim for a trade surplus.

Foreign Trade: The sum of all commercial activity within a country. Increased foreign trade strengthens a country’s economic position (e.g., Chile).

Actors in International Marketing

  1. Government: Plays a significant role in accelerating or curbing international marketing activities. For example, Evo Morales’s conflict with the U.S. led to the reversal of the ATPDEA.
  2. Financial Institutions: Provide financial resources for export activities, crucial for investment and expansion.
  3. Support Agencies and Export Promotion: Institutions like CAINCO, chambers of commerce, NGOs, and export promotion agencies can facilitate or hinder international trade.
  4. Suppliers of Raw Materials and Supplies: Provide component parts for export products.
  5. Foreign Countries: The final recipients or exporters of products. Their characteristics and openness to trade can create advantages or barriers for exporters (e.g., France’s strict import/export regulations).

International Market Analysis

Macro Environment Analysis

Unlike local market analysis, international marketing requires analyzing at least two macro environments: the domestic market and the target export country. This is done to:

  1. Identify markets with better conditions based on macro analysis.
  2. Compare domestic and international markets to assess the favorability of exporting.
  3. Identify variables that differentiate the product for each market (e.g., voltage differences: 110V in Central America vs. 220V in South America; adapting food products like soy burgers for different cultural preferences).

Analysis of Macro Variables

Cultural Variables

Customs, lifestyles, traditions, rituals, and forms of organization are crucial macro variables. Understanding these elements is vital for a product’s acceptance in a foreign market.

Factors to consider for cultural acceptance:

  1. Cultural Permeability: Cultures vary in their openness to foreign products.
  2. Nationalism: Products may face resistance if they conflict with nationalistic sentiments.
  3. Need and Desirability: Products must fulfill a culturally accepted need or desire. Market validation according to local standards is essential.

The promotional mix must align with the target group’s socially accepted cultural concepts.

Case Study: Disney’s Global Expansion

Disney’s internationalization efforts highlight the importance of cultural adaptation. Tokyo Disney, mirroring Orlando’s features with minor adjustments and bilingual instructions, was highly successful, with 92% Japanese attendance, partly due to the emphasis on English education in Japan. In contrast, Euro Disney faced challenges. French cultural preferences (e.g., different entertainment styles, dining habits, and hotel expectations) and language barriers led to dissatisfaction. Additionally, European parents prefer educational entertainment, unlike the purely entertainment focus of Disney.

Key Questions:

  1. Which park was more successful? (Japan)
  2. Which culture is more open to American culture?
  3. Was a cultural analysis of Europe important prior to the park’s launch? (Yes)
Economic Environment

The economic environment determines the types of products that can be exported and the selection of potential market segments based on socio-economic strata.

Key economic variables:

Stage of Economic Development:

  1. Survival Economies: Underdeveloped infrastructure, low cost of living, focus on basic necessities, high poverty rates (e.g., Ethiopia, Burkina Faso). These markets are unsuitable for foreign trade due to low purchasing power and high risk.
  2. Third World Countries: Early development stage, slow economic growth, developing infrastructure, significant poverty (e.g., Bolivia, Guatemala, Bangladesh, Kenya, Philippines). These markets need capital goods; a small middle class accesses lower-quality products.
  3. Industrializing Countries: Rapidly industrializing, not yet technology producers, significant middle class with incomes similar to developed countries (e.g., Brazil, Argentina, India, Poland, South Africa, South Korea, Australia). These markets buy technology and products similar to developed economies but in smaller quantities.
  4. Developed Countries: High income, advanced infrastructure, technology producers, high living standards (e.g., Sweden, U.S., France, Italy, Canada, Japan, China). These markets can acquire any product meeting their quality standards.

The level of development dictates the types of products and trade conditions.

Exchange Rate

The exchange rate is the value of one currency relative to another, crucial in foreign trade. The U.S. dollar and the euro are the main currencies. Exporters and importers must consider currency fluctuations, which can create or destroy market opportunities.

Cost of Living

The cost of living is the sum of expenses for goods and services. Understanding this in the target market helps adjust export prices and determine profitability.

Pattern of International Consumer Spending

This indicates how consumers allocate their income. Spending patterns vary significantly between countries (e.g., luxury cars in Bolivia vs. real estate in Chile vs. travel in Germany).

Financial Arrangements for Export

  1. Export Company Capacity: Assess available capital and borrowing options. Companies with limited financial capacity may opt for temporary or simpler export arrangements.
  2. Export Know-How: Companies lacking knowledge of external markets, logistics, negotiation, packaging, and trade agreements should start with small-scale exports.
  3. Production Capacity: Complex, long-term export arrangements require large production volumes and adherence to quality standards.
  4. External Market Characteristics: Adapt to demand trends in foreign markets, including seasonal or novelty demands that may suit temporary exports.
  5. Free Trade Agreements: Long-term agreements can offer tax reductions and other benefits (e.g., the now-dissolved APTA, which impacted many small Bolivian manufacturers).

Types of Export

Companies should adopt a step-by-step approach, especially when new to exporting.

  1. Experimental Export: Test market reaction with surplus production, often using a foreign wholesaler (e.g., exporting sesame seeds to Argentina). This helps evaluate markets, transport modes, and export conditions.
  2. Temporary Export: Enter a market for a limited period, usually through a wholesaler, to adjust production and management for future steady exports or to fulfill occasional demand (e.g., supplementing an Ecuadorian company’s quota).
  3. Continuous Export from Country of Origin: Establish medium- to long-term relationships with foreign buyers, optimize transport, and adapt to buyer requirements. Financing can be provided by the exporter or financial institutions (e.g., oil exports to Colombian supermarkets).
  4. Export with Arrival in Country of Destination: Offer products directly to retailers or end-users through own premises or representatives abroad (e.g., Bolivian designer Liliana Castellanos’s boutiques in New York, Buenos Aires, Paris, Copenhagen, and planned expansion to Japan).
  5. Export with Production in Country of Destination: Establish a factory or assembly plant in the target market or a nearby country (e.g., Philips assembling TVs in Mexico).
  6. Know-How Franchise: Sell brand awareness and expertise to a foreign investor for royalties or profit sharing (e.g., Burger King, Park Hyatt hotels).