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Assignment on MGT107- International Marketing, to overcome the different barriers to get the output

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MGT107- International Marketing

Introduction

There are several issues that cause huge impact on the international markets of several multinational companies. The main objective of a successful international market distribution of a product is to overcome the different barriers such as spatial, temporary and ownership barriers while distributing the products to different intermediating producers and finally to the customers itself. Various international logistics affects the distribution process too in the international markets. The various factors affecting the viability of the international market and their impact on the success of the organizations have been discussed in the paper. 

Political Factors:

There are several political issues that cause huge impact on the international markets of several multinational companies. Here are the few political factors that generate impact on the viability of international markets. The factors are Laws, Licensing and Permits, taxes, fees and currency risks.

1) Laws:

 

Every country has different legal systems. Hence, the political system and regulations vary from country to country. Some of the companies face great difficulty in performing business in certain countries. For instance, there is a strict law in Thailand that any foreign cannot own 40% of the business in the country. Such laws prohibit the operation of doing business in international markets. So, management must be aware of such laws and should strategize their marketing plans according to the laws and regulations of the target market. 

 

2) Licensing and permits:

 

Many governments use a policy to give out a costly permit or license to another company to manufacture and sell their products for your company. This is a clever strategy to enable a large percentage of income inside the foreign country (Gilpin, 2016). But the multinational company suffers losses due to these regulations of the government. For example, in Netherlands, Pepsi had to give license to Heineken to market and sell their products for them. 

 

3) Taxes:

 

Taxes are also an important strategy for an administrative body to limit and affect the operation of multinational companies in a foreign land. Imposing high tax rates in foreign products will indirectly affect the sales rate of the products in that country. So, the companies have to make different international marketing strategy to cope with the various tax rates of different countries. For example, united States impose high tax rates on foreign goods. So, foreign companies get affected due to this policy by the government. 

 

4) Fees:

Many a times, when companies try to market products in foreign soil, they may have to pay certain amount of fees in order to sell the products in that country. The fees can be a one time deal or recurring and it depends on the product that the company is selling. In case of luxury items, the amount of fee can be very high. Hence, it creates hindrance of operating business in international markets.

 

5) Currency :

 

Currency of the foreign country is also another vital factor for doing business in international market. If any multinational company’s money is tied up in a foreign land, the company may face huge loss in the case of economic turmoil in the foreign country. For example, in the year of 2012, Iran’s Rial dropped to significant numbers compared to US dollars (Cohn, 2016). It created huge loss for multinational companies operating in Iran.

Economic Factors:

Economy of a country also plays a major role in determining the success of multinational companies in international market. There are several factors that influence the markets. Here are few of them. The discussed factors are Per Capita Income, Relevant Class Structure, Supply and Demand and Financial transaction and banking.

 

1) Per Capita Income:

 

Wealth of a country is a vital factor to market and sell the products of a multinational company. The management of the company must be aware of the average income of the maximum number of people in a country. In this way, the company may understand whether their product will have demand in that country or not. So, in countries where per capita income of large number of potential customers is quite lower than the average cost of the products, it will be very difficult for the companies to sell the products in that country. But sometimes, the companies do not require a large percentage of customers to buy their products (Dabla-Norris et al., 2015). For example, a branded automobile company wants to sell products in a country like Estonia where only 1% can afford their products. If the 1% of the potential customers is 15000 in number, the company can try to sell the products to at least 10000 people.  

 

2) Relevant Class Structure:

 

When a company decides to market its products in a foreign country, the company must be aware of the economic class structure of different countries in order to achieve success in operating business. Most of the countries in the world have three classes according to their economic condition. There are upper, middle and lower classes. But the number of people in each of the classes varies from country to country. The company has to market its products depending on the type of class that dominates in the country. For instance, USA possesses a large section of people who belong to ‘middle class’. But in country like Philippines, large section of people belongs to poor class. So, there are very small sections for upper and middle class.   

 

3) Supply and Demand:

 

One of the most significant aspects of economic factors for the companies is Supply and Demand. Nowadays every company around the world has to research about the economic condition of the potential foreign markets to sell the products. The companies need to understand the demand of the foreign markets and in according to that provide the supply of such products that will attract large number of potential customers (Bekaert et al., 2016). In modern world, any product can be sold if the company possesses the capability of marketing the product in a right way and right place in the context of the people of that country.  

 

4) Financial Transaction and Banking:

 

Financial processes and transaction are important too for selling the products in international markets. In developed economies, the process of purchasing any foreign goods are conducted via credit cards, debit cards, online payment processes or cash transfers. But this is not the case for underdeveloped economies. So, the companies face huge barriers to conduct business in those countries. So, these financial conditions do not create secure environment for foreign companies to conduct businesses. 

 

Technological Factors:

There are also several technological factors that improve or affect the performance of business in international markets. There are multiple technological factors that influence the operation of doing business in foreign markets. Here are few of them. Listed below are the two important technological factors.  These are automation and internet connectivity.

1) Automation: 

 

The automation technology has revolutionized the process of doing business in international markets. Nowadays, the companies are replacing human employees with machines to perform more efficiently to compete in the markets. Automation has reduced expenses in the areas like distribution, manufacturing, in supermarkets and many other different areas. In spite of the efficiency of doing business and creating profitability for the companies in short amount of time, the companies may not provide benefits to the countries where unemployment rate is rather higher than most of the countries (Mariadoss et al., 2014). So many employees fear the risk of losing their jobs due to the rise of using the automation systems in international businesses. 

 

2) Internet connectivity: 

 

The mergence of internet has created huge impact on marketing around the world. Due to the internet facility, one can easily connect with the people on the farthest corner of the world. Nowadays every multinational company uses platforms like social media, websites and other various digital medium to market and sell their goods. So, internet facility has increased the sales rate of the products (Mathews et al., 2016). Companies can now easily reach to the customers and find out their opinions regarding the products. It helps them to improve the quality of the products in future. So, implementing internet connectivity in businesses has provided huge success to many companies that operate in international markets.  

Socio-cultural factors

Among the various factors, that impact the viability of the process of international markets at the time of the international marketing of an organisation is the different socio- cultural factors of those international markets. While conducting the marketing plan across the borders, the companies are required to evaluate the factors such as the social structure of that country and the cultural background of the people. 

A country has its own cultural or traditional background and the social structure of the country is thus bound to be different from the origin country of an organisation. Thus, while doing international marketing it is very important for an organisation to keep in mind these socio- cultural factors in order to do a successful marketing in that international market of the respective country. For example, in order to attract the local customers of an international market, an organisation could modify their products and services in that country at the time of production and distribution so that it could match the preferences and demands of those products and services in that place(Ambos& Håkanson, 2014). At the time of promotion of the organisation too, in an international market, the company should keep in mind these socio- cultural factors and do the promotion in such a way that would match those factors and be successful in promoting the brand in that country. There are different socio- cultural factors that influence the international marketing of an organisation and they are as follows.

Taste: Taste is a very important factor while doing the international marketing of a company. The taste of the local customers changes with the vivid regions or different countries. For example, while doing international marketing in India, McDonalds realised that the beef consumption in the country is quite off limits, they had to introduce other vegetarian and various regional choices in their menu such as different rice dishes in order to promote the business in the country (Eteokleouset al., 2016). Thus, in order to do a successful business in an international country, an organisation should keep in mind the different tastes of the people of that country. 

Consumer Habits: The cultural background, social structure or the local traditions of different regions or countries all around the world is quite different in different places. These factors shape the consumer habits of a country and their buying preferences or decisions are quite influenced by these factors. Thus in order to do a successful promotion of the business in an international market a company has to first understand these factors and then do  the promotion and further business proposition in a manner according to the consumer habits shaped by these factors so that they can be successful in attracting the local customers of that country. 

Regional values: Even the regional values change throughout a country. There are quite different regional values of people at different places inside a country. For example, in Canada there are a large region where there are a huge number of people who speak French while the rest of the country mainly speaks in English (Bowieet al., 2016). In such cases, a company doing international marketing in such different regions of a country should adopt different marketing strategy to reach and attract the customers of these different regions. 

Therefore, in order to do a successful marketing in an international market, the socio- cultural factors of that country is a very important factor and thus should be taken care of seriously by the marketing organisation.

Geographical

 

There are many geographical factors too that influences the international marketing process of an organisation. There are many possible ways in which the market of a country can be divided based on its geographical factors. While doing international marketing an organisation could approach the marketing process in different regions of a country based on these different geographical divisions done by the help of the various geographical marketing factors such as the climate, location, lifestyle and even the language of those specific regions(Cosar& Fajgelbaum, 2016).Thus, the size and other factors of a market of an organisation differ based on these geographical factors of a country. There are three main ways in which a market could be divided based on the geographical factors and they are climate, population density and language. 

Climate: the climate changes in the different regions of country. Thus, the consumer habits are also changes with the change of the climate in different regions of a country. For example, some regions of a country could be cooler that the others or some could be hot weathered. Therefore, the needs and demands of these places will be quite different according to their respective climates(Smith, 2016). So, an organisation should do their production and marketing in these different places differently. 

Population density: Population density of different places is different. Thus, before doing the marketing in these different areas with different population density, an organisation should first divide their regional geographic market into metropolitan areas, rural or urban areas, suburban areas according to the size and the population density of those places. 

Language: The communication medium or the language of different country and even its different regions change while doing international marketing. Thus, at the time of doing the promotion or even the business transition with the people of that country in order to do a proper communication the translation and interpretation of the languages should be done seriously to reach the local customers and other business mediators of that country.

Marketing mix

There are four basic components of a marketing mix, production, pricing, distribution and promotion. 

Production

There are different policies that a company can adopt while doing the international marketing of the organisation. 

• Standard production: In this policy, the company produces a standard unaltered product across all of their international markets. This policy is adopted for the products, which has similar utility in different markets. This strategy is quite comfortable and imposes less expense of production on the company. An example of company using this international production policy is IKEA(Davcik & Sharma, 2015).

• Product adaptation: in this method the products and services of an organisation is modifies and adapted according to the changing preferences and demands of different international markets. This is a much costly process and requires a proper understanding of the different preferences and demands of the respective market. 

• Gradually changing production: this production policy is adopted when the respective market is less competitive and there is no necessary urge or hurry in the process of changing or modifying the products for it. 

Pricing

Pricing of the products and services while doing international marketing, is very important for a company. The currency and the value of it internationally changes with the country. So usually, the price of the products and services of a company changes with the changing international markets. Thus, at the time of doing the pricing of the products a company should keep in mind these factors for doing a proper pricing of their products and services in the respective international markets. 

Distribution

At the time of distributing the products in an international market, the main factors that an organisation should take care of are maintaining the proper place, time and form of that product. The main objective of a successful international market distribution of a product is to overcome the different barriers such as spatial, temporary and ownership barriers while distributing the products to different intermediating producers and finally to the customers itself. Various international logistics affects the distribution process too in the international markets. 

There are three type of international marketing mix strategy.

Global marketing mix strategy: In this marketing mix strategy, the organisation assumes that the consumers have a global standard choice or preferences (De Mooij, 2018).

National marketing mix strategy: In this process, different marketing strategy for the products and services of a company is adopted for different international markets based on their respective demands and preferences. 

Hybrid marketing mix strategy: It is a more flexible marketing mix strategy where the products or the services of the organisation are only altered or modified if there is a need for it; otherwise, the company uses the same standard marketing mix strategy for its different international markets.

 

Conclusion

The paper dealt in highlighting several factors that are having huge impact on the international markets of several multinational companies. The main objective of a successful international market distribution of a product is to overcome the different barriers such as spatial, temporary and ownership barriers while distributing the products to different intermediating producers and finally to the customers itself. Various international logistics affects the distribution process too in the international markets. Thus in order to do a successful promotion of the business in an international market a company has to first understand these factors and then do  the promotion and further business proposition in a manner according to the consumer habits shaped by these factors so that they can be successful in attracting the local customers of that country.

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