The process of decision-making in a firm with operations in many countries is complex. This is the result of different cultural expectations and the influence of corporate culture. On one hand, overseas branches work hard to fit into the local culture. On the other hand, they have to struggle to make sure that they remain faithful to the culture of the organization. This process of ensuring every business decision bears both marks of the local culture while remaining faithful to corporate culture sets the stage for complexities that international markers face.
The three main reasons why research must evolve in the area of international marketing are as follows. First, the world is in transition. The most dominant force driving trends in international trade today is globalization. Globalization is the process of reduction and elimination of traditional barriers to trade based on technological advances. Many changes in human relations occur during this process. People from all over the world are finding it easier to interact online. They form online communities to pursue common interests without caring about the geographical barriers that exist between them. It is becoming more difficult with time to determine what makes up the local culture, and what comes from the amalgamation of global cultures.
Secondly, existing research is making it easier for researchers to find areas of focus. Advances in social sciences in the last few decades have provided modern-day researchers with a rich set of tools to handle international research. Indications so far are that there will be more research into how people relate in international settings. This will also influence research into marketing in the global arena.
The third reason for this phenomenon is that the traditional barriers to change such as physical barriers and economic barriers are no longer carry the same amount of influence traditionally associated with them. Political barriers are also crumbling. The world is moving towards greater international unification. The formation of trading blocs such as the EU is the trend. The result is that the international market is not a static place to carry out research. It is a dynamic environment, which requires constant adjustment. This affects how researchers dealing with issues in international marketing run.
Marketing standardization is an important concept in international marketing. This concept informs branding and the retention of a common international market. Companies such as Coca-Cola are recognized internationally because of a careful marketing policy based on standardization. The Coca-Cola bottle looks the same regardless of the country in which the drink is sold. In addition, every Coca-Cola drink tastes the same regardless of the country where it is sold.
Standardizing of marketing communications has several advantages. First, it makes marketing more cost-effective because only one design effort goes into the production of marketing materials. Usually, such an effort involves the use of graphics and symbolism to communicate in a way that negates the need for language. Secondly, it is easier for a company to control the message that its customers receive. This means that all the consumers who use the company’s products and services in different markets will get the same message from the company. Thirdly, it simplifies branding efforts. The company can use the same communication elements with only minor differences to reflect regional tastes and preferences.
The issues that make the standardization of marketing difficult are as follows. First, culture is very difficult to surmount. The same message can have different meanings to different people. In Germany, the swastika represents the Nazi regime. It is a detested symbol there. In India, it is a religious symbol. Therefore, every international marketer must verify the meaning associated with the communication elements chosen for an international audience. Secondly, language use varies. Even in countries that speak the same language, local usage will vary. This makes the language very ineffective in the context of standardization.
The factors a company needs to consider when deciding whether to standardize its international marketing communications include the following. First, is it possible to use elements that do not rely on language to communicate? Coca-Cola’s Christmas advertisements usually try to achieve this ideal. They create marketing materials that do not rely on language. Secondly, the company needs to consider whether it is interested in building an internationally recognized brand, or whether it is better off building a regional brand.
Grey marketing refers to the distribution of goods in a parallel market usually through channels that are unrelated to the manufacturer. Grey markets serve a useful purpose to consumers because they avail products that would otherwise not be available in a given market. At the same time, the goods tend to be cheaper than buying directly from the manufacturer. Grey markets may work for a manufacturer if the manufacturer intends to enter a marker and is trying to find out the best price levels for the product in that market. However, its unregulated nature makes it difficult to measure the performance of the product. A manufacturer may also benefit from a grey market if the manufacturer does not have direct access to a region. This may arise because of security issues, lack of trade agreements between two territories, or because of an international diplomatic problem between the two countries. A manufacturer may also lack the capacity to enter that market formally. The main issue is that the grey market relies on the products made by the manufacturer. Therefore, the market increases the volume of products sold in that market.
Grey markets arise when a manufacturer fails to offer a product to a given market. Usually, business people discover the market and find ways of importing the product to meet the demand. Grey markets may also arise if a manufacturer is not ready to go into a market that has demand for its products. The third situation that can lead to the emergence of a grey market is where a company tries to sell the same product in two markets at different prices. Discerning traders will buy the products from the cheaper markets and sell them in the more expensive markets, at a lower price than the official distributors.
Manufacturers can deal with gray markets by expanding their distribution efforts to cover all places where there is demand. In cases where the market exists because of price differentials, the best strategy for the manufacturer is to standardize prices in the markets. This can be done by analyzing the prices of the product in the gray market and then setting a price that competes with it. A manufacturer can also invalidate warranties on products sold in grey markets so that there is a valuable component when a consumer buys from the manufacturer.
Theories of Internationalization
The three key theories of internationalization are the stage theory, transactional cost analysis, and the industrial network approach. The stage theory postulates that internationalization takes place in stages. The first stage is the time when there are no organized sales to a given region. All the sales that a manufacturer makes at this time are intermittent and uncoordinated. The intermediary stages include a time when a distributor imports products from the manufacturer to sell the products in a target destination. Having an official distributor is the first deliberate step of entering a market. The manufacturer still avoids the risk of a full operation in the country. This phase is succeeded by a stage defined by the opening of a subsidiary by the manufacturer. In this case, the manufacturer enjoys control over the operations of the subsidiary and can carry out strong marketing efforts.
The transactional cost analysis is a theory of internationalization that assumes that a manufacturer will use intermediaries as long as it is more cost-effective. This theory ignores the impact of the cost of production. In truth, a manufacturer will consider this cost before making internationalization decisions.
The third theory of internationalization is the industrial network approach. This approach to internationalization takes a functional approach. The relationships developed using this model relies on the common functions in a number of sectors. In this sense, the collaboration achieved is based on common functions.
The entry of “Born-global” companies is providing a different perspective on the theories of internationalization. Companies of this nature do not internationalize as a response to growth. Rather, they are created as international entities. In this sense, they derive their competitive advantage from international assets. This is a new structure in the process of internationalization. It shows that internationalization can be the starting point of a company. Born-global companies start their operations based on activities that take place in different countries. An American company today can be set up operations to reach a market in Western Europe using products it manufactures in China. The globalization of business activities has made establishing these relationships relatively easy.
International Market Selection
A company in the hospitality industry would use the following international market selection process to determine its potential foreign markets. First, it would take steps to analyze its internal environment. Examination of a company’s internal environment includes analyzing the international business experience of the company in the hospitality industry. It is also important to consider the availability of resources internally to determine whether the company can afford to take advantage of an international business opportunity. The third aspect the company will need to consider its existing relationships with other businesses that can support its expansion. For instance, are the company’s suppliers doing business in the foreign investment destination under consideration?
The second aspect of this analysis is the carrying out of an external environmental analysis to determine whether the business environment in the new country is fit for the business. This requires the company to take a broad look at the political, economic, social, and technological environment in the investment destination. The demand may exist, but the country may lack one of the critical elements that make it easy to set up an international market. For instance, establishing a hotel in a country that is politically unstable may be impossible, despite the need for the service.
Based on these factors, the company would need to consider whether it has what it takes to be successful in the new market. The main issue in this regard is that the company must find a market that has enough potential. In addition, the company must decide whether it has the capacity to take advantage of the opportunity. The success factors that come to mind when looking at an international business differ from country to country. Some of the elements include finding human resources, business location, and marketing avenues.
The process of international market selection would require the company to find a segment it would like to serve after it considers the environmental issues. The process of international market selection requires the organization to come up with a market entry strategy. The strategy development process starts with the identification of a segment and narrowing down to a part of the market segment that the company can best serve.
International Marketing Research
International marketing research is full of challenges arising from various factors. The first challenge relates to the research process. Part of international research involves finding samples that meet certain criteria in different regions. It is very difficult to find samples that would meet a global criterion. Each country has its own peculiarities that make it very difficult for international marketing researchers to find practical samples in all the countries in which they would like to conduct research. Secondly, some countries do not have experienced researchers because of their stage in development.
This can make it difficult to make decisions because external researchers are not familiar with local factors. Usually, it is easier to use local researchers working under the direction of international researchers to conduct local components of research. The third challenge associated with international marketing research is cultural barriers. An American consumer would know about questionnaires and other data collection methods when he interacts with them. This may not be the case in Africa. Similarly, a lone male researcher can interview an American woman regardless of their relations. In Muslim countries such as Saudi Arabia, a woman cannot interact with a man she is not related to, and if it happens, it has to be in the presence of a male relative.
The fourth challenge of international marketing research is the time barrier. While real-time activities have enabled companies to improve their operations, it is also a barrier to concurrent work. In reality, some parts of the world are usually asleep when others are awake. In the event that an international research effort is taking place in several countries simultaneously, differences in the time will make it difficult for different teams to collaborate. The fifth challenge that hampers international marketing research is that there is no guarantee that any study can be generalized to other areas. In this sense, international marketing success in one region is not a guarantee of international marketing success in another region. The fact that there is the market potential for a product in one region is not proof of the same market potential in another territory. In conclusion, international marketing results are difficult to generalize.
Defining culture is a very difficult undertaking because of the difference in perspectives of what the definition constitutes. Essentially, culture refers to learned behavior among groups. The main elements in the definitions of culture are as follows. First, culture includes a set of values, usually underpinned by religious beliefs. A value is usually a moral perception concerning a certain issue. Secondly, culture is shared. For a social or spiritual element in society to qualify as a cultural element, it must be something that many people in that society know and practice. It is important to note that culture is not static. Some practices last for many generations, but some simply die off in the wake of the exposure to social dynamics. Thirdly, culture includes attitudes and belief systems. The Hindu tradition in India was the cradle of Gandhi’s passive resistance to colonial rule. In summary, culture amalgamates values, sense of community, behavior, attitudes, language, and belief systems.
Hofstede developed a theory that is useful in the appreciation of cultural differences across international markets. Hofstede’s theory had four dimensions. The first dimension is individualism-collectivism, which refers to the two extremes a culture can take in relation to the basic decision-making unit. Some cultures promote personalized living, while some stress communal life. Secondly, some cultures promote uncertainty avoidance. Such cultures promote activities meant to reduce risk and to make change manageable. China is a good example, where change is very structured. The third dimension is the masculinity-femininity paradigm, which leads to the assignment of roles based on gender. The final paradigm is power distance, where roles depend on distance from social power.
The impact of culture on business is that it shapes demand and it affects business relationships. People from different cultures across the world usually become sophisticated in certain elements. For instance, oriental cuisine tends to be spicy. Therefore, the demand for spices in oriental counties is very high. On the issue of culture affecting business relationships, culture plays an important role. This means that people in one society will approach the development of business relationships in a similar manner to social relationships. The differences in gender roles in different countries may make oriental business leaders feel unsettled about settling a business deal with a woman CEO from the West.