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International Marketing Environment For International Marketing MCOM Sem 3 Delhi University Notes

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International Marketing Environment For International Marketing MCOM Sem 3 Delhi University Notes

International Marketing Environment For International Marketing MCOM Sem 3 Delhi University :  Environment consists of forces. Environment is made of such controllable and uncontrollable forces. It is the environment that determines favourable or unfavourable conditions, and hence, provides either opportunities or threats and challenges. Degree of one’s success, to a large extent, depends on effect of marketing environment and ability of the firm to respond effectively. International marketing environment covers all the relevant global forces influencing international marketing decisions.

These forces may be internal (such as resource ability and management attitudes), may be domestic (such as government policy toward international business and facilities), and global (such as overall international business environment of relevant part of the world). However, discussion of global forces is more relevant as they are major considerations in international marketing.

Definitions:

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We can define the word ‘international marketing environment as under:

1. International marketing environment is a set of controllable (internal) and uncontrollable (external) forces or factors that affect international marketing. International marketing mix is prepared in light of this environment.

2. International marketing environment consists of global forces, such as economic, social, cultural, legal, and geographical and ecological forces, that affect international marketing decisions.

3. International marketing environment for any marketer consists of internal, domestic, and global marketing forces affecting international marketing mix.

Three level international marketing environment

Factors of International Marketing Environment:

Factors or forces involved in the international marketing environment can be classified into three categories as stated in the figure 1. Manager dealing with international marketing has to design his marketing mix and marketing (mix) strategies in accordance with these forces.

He has to keep in mind the present them and expected impacts of such forces while taking international marketing decisions. The environment determines the degree of favourableness for any marketer for international marketing; determines level of opportunities and threats.

1. Global Factors:

Such factors are related to the world economy. Broader picture of global phenomenon affects every decisions of international marketing.

Main global factors include:

i. Customer-related factors

ii. Political and legal factors

iii. Social factors

iv. Cultural factors

v. Competition

vi. Global relations among nations and degree of the worldwide peace.

vii. Geographic/ecological/climate-related factors

viii. Functioning of international organisations like UNO, World Bank, WTO, etc.

ix. Availability of marketing facilities and functioning of international agencies, etc.

2. Domestic Factors:

Domestic factors are related to the economy of the nation. Overall economic, social and cultural, demographic, political and legal, and other domestic aspects constitute domestic environment for international marketing. This environment affects international marketing mix in several ways.

Important domestic factors include:

i. Political climate/stability/philosophy

ii. Government approach and attitudes toward international trade

iii. Legal system and business ethics

iv. Availability and quality of infrastructural facilities

v. Availability and quality of raw-materials

vi. Functioning of institutions and availability of facilities

vii. Technological factors

viii. Ecological factors, etc.

3. Internal or Organisational Factors:

These are internal and controllable factors. They are related to internal situation of the company dealing with international trade. International marketer needs to use, adjust, and organize these factors to satisfy needs and wants of the (international) target markets.

These factors include:

i. Objectives of company

ii. Managerial philosophy of company

iii. Personal factors related to management

iv. Managerial attitudes toward other nations, customers, social welfare, etc.

v. Company’s policies and rules

vi. Resource ability of company and marketing mix

vii. Form of organisation and organisational structure.

viii. Nature and types of employees

ix. Internal relations with other departments

x. Company’s relations with other stakeholders and service providers.

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International Marketing Environment For International Marketing MCOM Sem 3 Delhi University Notes

International Marketing Environment For International Marketing MCOM Sem 3 Delhi University : A Key Challenge For International Marketers Is To Develop A Good Understanding Of The International Business Environment. Identify The Key Environmental Factors That Are Of Importance To The Success Of International Marketing And Discuss Their Impacts On International Marketing Decisions.

1. Introduction

International Marketing Environment For International Marketing MCOM Sem 3 Delhi University : Due to technological advances and rapid economic growth, the level of world trade has increased considerably over the last four decades. Merchandise exports, for instance, grew from a value of $160 billion in 1963 to almost $16,000 billion in 2008 (WTO, 2009). Motivated by the many rewards and opportunities international exchange offers, more and more countries and companies have become largely involved in international marketing. However, the implications entailed in this “process of planning and conducting transactions across national borders” are rather different to those companies usually have to face when conducting domestic marketing (Czinkota & Ronkainen, 2007, p.4). Differences in cultures, economic conditions, and governmental systems amongst countries mean that the marketing activities of companies taking their operations outside national borders are affected by a new series of environmental factors. In order to be successful at international marketing, it is vital that marketers attain a thorough understanding of these factors as they impact the international business environment and take them into account when carrying out decisions on marketing activities (Hollensen, 2007). Consequently, this essay aims to identify both these fundamental environmental factors and the effects they have on the international marketer’s decision making. The essay will firstly consider the factors that derive from culture, such as language and religion. Secondly, the economical elements that influence the international business environment will be examined. Finally, the essay will take into consideration legal and political factors.

2. Cultural Environment

International Marketing Environment For International Marketing MCOM Sem 3 Delhi University : According to Hofstede (1980), culture is “the collective programming of the mind which distinguishes the members of one human group from another”. Given that culture affects consumers’ behaviour, understanding cultural dissimilarities is crucial for the success of international marketing (Usunier & Lee, 2009).

Hall (1976) states that there are high context cultures, such as the Japanese one, where the context is equally as important as the words used, and low context cultures, such as the North American one, where communication is often solely conveyed in words. Companies need to be aware of and adapt their marketing concepts to these differences as otherwise it can easily lead to misinterpretations in communication. They need to take into account the element of language which consists of a verbal (the words used and how they are spoken) and a non-verbal part (e.g. gestures and eye contact). The challenge for them is to attain both a thorough understanding of the language in terms of its technicality and the context in which it is used (Hollensen, 2007). In Japan, for example, IBM changed the classification number of its series 44 computer as the pronunciation for the word four is similar to the word death (Czinkota & Ronkainen, 2007).

A further important source of culture is religion. Marketers need to be aware of the differences between the main types of religion as well as the variations within them (Hollensen, 2007). In Hinduism, for example, people’s capacity of consumption is determined by their status. Companies need to take this into account when making planning their marketing strategy. Also, as the main holidays are linked to religion marketers need to consider when they take place when planning marketing programs. The exchange of Christmas gifts, for example, occurs on 6th December in the Netherlands, whereas in other countries they are opened on 24th or 25th December (Czinkota & Ronkainen, 2007).

Also, companies need to take into account the values and attitudes of countries. The more these shared beliefs or group norms are embedded into the culture the more care companies have to take when implementing marketing activities (Blackwell et al., 2005). Societies that place a high value on tradition are more reluctant to change and may perceive foreign companies with scepticism (Hollensen, 2007). In Japan, for example, many bureaucrats feel that the consumption of foreign products is disloyal to their country (Czinkota & Ronkainen, 2007).

3. Economic Environment

International Marketing Environment For International Marketing MCOM Sem 3 Delhi University : International marketers equally need to be aware of economic factors when undertaking marketing decisions (Hollensen, 2007).

Population figures provide a basic indication of the attractiveness of the market in terms of size and potential growth by looking at life expectancy, age distribution and population growth. They allow marketers to identify the segments and the geographical areas they should target (Czinkota & Ronkainen, 2007). Low population growth rates, for example, usually characterise highly economically developed countries with good disposal income (Bradley, 1999).

Also, income levels need to be taken into account as they provide an indication of the purchasing power of the market and allow companies to adapt their marketing concepts accordingly (Hollensen, 2007). A packaged goods company, for example, brought out a more economic version of its product in countries that have lower income levels by using cheaper raw materials. Nonetheless, marketers should not greatly rely on this indicator as there are certain types of products that because of the high value they create for the consumer are not affected by income levels. In China, for example, due to being a good upgrade for bicycles and a cheap alternative for cars, sales of motorcycles are high in the country despite the fact that the price of the product represents a high proportion of salary (Czinkota & Ronkainen, 2007).

4. Political And Legal Environment

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International Marketing Environment For International Marketing MCOM Sem 3 Delhi University : The political and legal environment of the company’s home country, its host country and the general international environment also has important effects on the marketing activities of international companies (Hollensen, 2007).

The politics and regulations of the company’s home country can determine its opportunities outside national borders (Hollensen, 2007). One of the main types of regulation that international marketers need to be aware of are embargoes and sanctions which are used to distort the free flow of trade. They need to know where they are applicable and take them into account when planning marketing activities so that they do not breach them and face subsequent sanctions (Czinkota & Ronkainen, 2007). Governments also employ export and import control systems. Export controls prevent or delay companies from selling their products in certain countries whilst import controls are used to protect and stimulate the domestic market. Marketers need to take them into account so they know where the company can do business and where it can obtain its supply from. Finally, governments may induct special measures to ensure that their companies behave in a correct manner in the international business environment. One of the major areas concerned is boycott, which is when companies reject to conduct business with someone (Hollensen, 2007). The government’s control in this area can force companies to decide whether to stop transactions and lose profit or to continue trading and pay charges. The Arab nations, for example, have blacklisted a number of companies who conduct business with Israel. In response, the United States imposed several laws to prevent U.S. companies from complying with the Arab boycott as it has political ties with Israel. Companies may lose out to firms whose home country does not employ such measures (Czinkota & Ronkainen, 2007). Nonetheless, according to Czinkota and Ronkainen (2007), it is best to avoid adopting inappropriate behaviour as it may lead to damages to the company’s reputation, boycotts by consumers and cancellation of transactions. This might cost the company more money than it gained through adopting such behaviour.

5. Conclusion

International Marketing Environment For International Marketing MCOM Sem 3 Delhi University : International marketers are faced with quite many and quite a range of factors in the international business environment that can have profound effects on their marketing activities. They need to be aware of the main sources of culture, such as religion, language, education, values and attitudes, aesthetics, and customs and manners. Given that they are embedded into societies and individuals it is necessary for companies to adapt their marketing activities to the market and not force a different standpoint on the consumer. International marketers also need to consider economical factors, such as population, income, inflation, economic integrations and infrastructure. They allow them to assess the attractiveness of the market and identify the segments and the geographical areas they should target. This reduces the risk of investing money in marketing activities in markets that are unprofitable. Finally, companies need to take into account the legal and political factors affecting the home country, the host country, as well as the overall international business environment. They need to be aware of the different governments, their political actions, their stability, and their relation with other countries, and constantly monitor them by keeping up to date with economic affairs around the world. This allows them to determine the level of political risk so that they can anticipate and plan for threats and take advantage of opportunities political changes offer them.

6. Bibliography

Blackwell, R. D., Miniard, P. W. and Engel, J. F. (2000). Consumer Behaviour. London: Thomson-South Western

Bradley, F. (1999). International Marketing Strategy. London: Prentice Hall.

Czinkota, M.R. and Ronkainen, I.A. (2007). International Marketing. London: Thomson-South Western.

Dallas, S. (15 May 1995). Rule no. 1: Don’t diss the locals. Business Week [online]. Available from: http://www.businessweek.com/archives/1995/b342416.arc.htm [Accessed 10 February 2010].

Frank, V. H. (1984). Living with price control aboard. Harvard Business Review, Vol. 62, March-April, 137-142.

Hall, E. T. (1976). Beyond Culture. Doubleday: Anchor Press.

Harvey, M. G. (1993). A survey of corporate programs for managing terrorist threats. Journal of International Business Studies [online]. Vol. 24, No. 3, 465-478. Available from: JSTOR [Accessed 19 January 2010].

Hollensen, S. (2007). Global Marketing: A Decision-Oriented Approach. London: Prentice Hall.

Usunier, J. C. (2009). Marketing Across Cultures. London: Prentice Hall.

WTO (2009). International Trade Statistics 2009. WTO. Available from: http://www.wto.org/english/res_e/statis_e/its2009_e/its2009_e.pdf [Accessed 19 January 2010].

WTO (2010). Understanding the WTO. WTO. Available from: http://www.wto.org [Accessed 10 February 2010].

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 International Marketing Environment For International Marketing MCOM Sem 3 Delhi University Notes

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